Employee - Independent Contractor - Agency Contractor

As employer you hire a person as employee or independent contractor or agency employees 

Employee -

(1) Employer will be responsible for all withholding

(2) Employer would be responsible for W2

(3) Social security number is important 

Independent contractor - 

(1) No tax withholding

(2) If the paying more than $600 then report 1099-MISC

(3) W9 reporting - TIN(Tax Identification Number) is important - in case of failure or incorrect TIN - backup withholding  - 28% 

ex. $1000 earning then $280 withholding

Agency - 

(1) Nothing to pay to person/contractor - pay to agency 

(2) No reporting 

(3) no withholding 

= = = = = = = =

Social security number verification system - SSNVS

Taxpayer Identification Number (TIN) - verification system

= = = = = = = =

SS-8 - to hire as employee vs independent contractor 

Form 945 - 

Use this form to report withheld federal income tax from non payroll payments. Non payroll payments include:

- Pensions (including distributions from tax-favored retirement plans, for example, section 401(k), section 403(b), and governmental section 457(b) plans), and annuities;

- Military retirement;

- Gambling winnings;

- Indian gaming profits;

- Voluntary withholding on certain government payments;

- Backup withholding.