What Forms Do I Need to Hire an Independent Contractor?
Author: Dan Stout | May 2, 2023
Bringing on additional workers to boost your workforce can feel like navigating a minefield when tax time rolls around. If you're like most roofing pros, at some point you've asked yourself, "What forms do I need to hire an independent contractor?" Luckily, we've got your back with this primer.
Essentially, there are two types of documents to be aware of: the official forms required by the IRS and the contracts needed to protect yourself and your business.
W-9 and 1096
As far as the IRS is concerned, the only documents you need to hire an independent contractor are a W-9 and a 1096. The W-9 is completed by the worker, which includes their tax ID number and filing information. The 1096 is submitted to the IRS by January 31 and summarizes all your 1099 payments made the previous year. The IRS website provides a more complete rundown.
But while those are the only forms the IRS officially requires, there are others you should be looking for as well. The IRS is on the lookout for employers attempting to classify traditional employees as 1099 to avoid making payroll taxes. It's important that you protect yourself and your business by gathering documentation to prove that your contractors are truly independent.
A Good Defense
Ask around, and you'll find no shortage of opinions about what exactly defines an "independent contractor." But the only opinion that really counts is what the IRS says about it: "The general rule is that an individual is an independent contractor if the payer has the right to control or direct only the result of the work and not what will be done and how it will be done."
You want to prove that you hired an independent contractor to do roof work (or supplementary HVAC, welding or drywall) to certain specifications, without instructing them how to deploy their workers or manage their resources. The two easiest ways to establish that proof are to draw up a contract for each assignment and to require an invoice from the contractor before cutting a check.
This is more easily done on larger projects than on small one-off jobs, but contracts can be structured to cover individual jobs or even a series of small projects. A simple contract, along with the resulting invoice, makes a strong case that your contractor is operating independently and does not fall under the classification of a W-2 employee. It's well worth the effort.
One other way to make sure you're classifying your worker correctly is to ask the IRS. You can fill out a Form SS-8 to get an official ruling from the IRS on a worker's role. Not surprisingly, it isn't the quickest option — the IRS says it can take up to six months to get an answer. (For a more thorough walk-through of this process, refer to the IRS' instructions.)
While the answer to "What forms do I need to hire an independent contractor?" is officially just a W-9 to start and a 1096 at the end of the year, be sure to create a paper trail that you can refer back to if needed.