It appears that you are trying to determine if a 1099-MISC needs to be issued to an employee. Employees are not issued 1099-MISC forms; they are issued Form W-2. Independent contractors are issued 1099-MISC.
If you need help in determining whether someone is an employee or independent contractor, IRS Publication 15-A (Employer’s Supplemental Tax Guide) can help. The below factors summarize the pertinent section in this publication:
- Behavioral control: Behavioral control refers to facts that show whether there is a right to direct or control how the worker does the work.
- Type and degree of instruction. Employers generally control when, where, and how work is to be done, what tools or equipment to use, what workers to hire or to assist with the work, where to purchase supplies and services, what work must be performed by a specified individual, and what order or sequence to follow.
- Training that the business gives to the worker. Employees may be trained to perform a service in a particular manner. Independent contractors generally use their own methods.
- Financial control: Financial control refers to facts that show whether the business has the right to control the economic aspects of the worker’s job.
- Extent of the worker’s unreimbursed business expenses. Independent contractors are more likely to incur expenses that are not reimbursed, such as fixed overhead costs incurred regardless of whether work is currently being performed.
- Extent of the worker’s investment. Independent contractors often have significant investment in facilities used to perform services for someone else, such as maintaining a separate office or other business location.
- Extent to which the worker makes his or her services available to the public. Independent contractors are generally free to offer their services to other businesses or consumers. They often advertise and maintain a visible business location. Method of payment for services performed. Employees generally are guaranteed a regular wage and work for an hourly fee or a salary. Independent contractors are generally paid a flat fee for a specific job.
- Extent to which the worker can make a profit. Independent contractors can make a profit or incur a loss.
- Type of relationship: Type of relationship refers to facts that show how the worker and business perceive their relationship to each other.
- Written contracts. While written contracts can describe the relationship and intent between the parties, simply stating in a contract that the worker is an independent contractor is not sufficient to determine the worker’s status. How the parties work together determines whether the worker is an independent contractor.
- Employee-type benefits provided to worker. Employers often provide fringe benefits to employees, such as health insurance, pensions, and vacation pay.
- Permanency of the relationship. Employer-employee relationships generally continue indefinitely.
- Extent services performed by the worker are a key aspect of the business hiring the worker. A worker who is key to the success of a business is more likely to be controlled by the business, which indicates employee status.
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