1099 vs W-2: Contractor or Employee?

Misclassification penalties stack: back payroll taxes, interest, penalties, plus the worker can file for unemployment and benefits. Get this right from day one.

• Quick test.
• When you must issue a 1099-NEC. You paid an unincorporated person/LLC $600 or more for services in the year.

Frequently asked questions

Do I need to 1099 someone I paid via PayPal or Stripe?

No — those payment processors issue 1099-K. You only 1099 for cash, check, ACH, or Zelle (not third-party processors).

What if I am not sure?

File Form SS-8 with the IRS for a determination, or assume employee — it is the safer default.

More taxes guides

• Sales Tax for Service Businesses: A Plain-English Guide
• Sales Tax Nexus: When You Owe Tax in Another State
• Resale Certificates: When and How to Use One
• Quarterly Estimated Taxes: A Survival Guide for the Self-Employed
• Self-Employment Tax: What It Is and How to Reduce It
• How Much to Set Aside for Taxes (and Where to Put It)