When hiring a 1099 subcontractor, it can be a challenge to find the right balance between professional experience, legitimacy, and reputation.
Because a subcontractor will be an extension of your company’s work and reputation, it’s critical to carefully select the right person. Here are some tips:
Ask for a portfolio or sample work.
A reputable contractor will have a current website or portfolio with work samples. Ask to see any websites or other places where the contractor’s work is displayed. Then ask yourself: Do you like what you see? Does the work meet your standards? Would you recommend the work to other people based on your first impression?
Ask for references or a list of past clients.
Speaking with past or current clients will give you a snapshot of the quality of the completed work. Ask for at least two references to check. If the individual will not produce references when asked, you may seriously question whether this person is a good fit for your company.
Always have an agreement.
Before you hire a contractor, create an agreement that spells out the expectations of both the contractor and company, and make sure it is signed by both parties. The agreement should include details about contractor requirements, fee structure, payment terms, and a cancellation policy.
Make sure the contractor completes the W-9.
When working with a 1099 contractor, you will not deduct any income taxes or payroll taxes; paying these taxes becomes the contractor’s responsibility. You will also not pay an employer’s share of payroll taxes. Each contractor should complete Form W-9, Request for Taxpayer Identification Number or Certification, before they begin any work. On this form, the contractor will identify the type of entity for the business (sole proprietorship, corporation, etc.) The W-9 also asks for the contractor name and Taxpayer Identification Number (TIN), which can be a Social Security Number (SSN) or an Employer Identification Number (EIN).
Keep the completed W-9 form on file. At the end of the year, you will use the W-9 to complete 1099-MISC forms for the contractors you paid showing the income received from your company. Then file Form 1096 with the Internal Revenue Service showing the total amounts on the 1099 forms.
Want to know more about working with 1099 contractors?
In our free guide, find out about the distinctions between
an employee and a contractor, as well as important IRS rules and recent
government action that may change the way you do business.