The difference between a contractor and an employee

Contractors and employees perform fundamentally different functions. Check out this page on the IRS website for more information about the differences.

If you have a contractor "misclassified" as an employee, your company could be liable for employment taxes and penalties from both the federal government and one or more state agencies. Consult a labor attorney about the circumstances of your particular situation.

With Justworks, it's easy to convert a contractor to an employee.

Converting a contractor to a full-time employee

From the contractor's profile, click the blue pencil next to "Employment". Next, you'll click "Edit employment and compensation" and change Type from "Contractor/Consultant" to either "Full-Time Employee" or "Part-Time Employee", whichever is appropriate. Also, be sure to change Pay Basis as well to either "Salary" or "Hourly" and enter the new Pay Rate.

If your new employee is salaried, you should review their upcoming pay to make sure it's correct. You can change any incorrect amounts by clicking the Override box and entering the correct amount.

Your employee will automatically be prompted to complete Form I-9 the next time that they sign into Justworks.

Contractors paid over $600 in a calendar year will receive a 1099

Justworks tracks how much your contractors are paid each calendar year and will send your contractors a 1099-MISC form if they are paid $600 or more. In addition, these earnings will be electronically reported to the IRS.

This service, along with unlimited payments to contractors, is included free of charge with any Justworks account.

How to add payments to for contractors paid outside of Justworks

In the Contractor's profile, navigate to "Settings" on the bottom left side of the page. Here, you'll see a tile labeled "Contractor Settings" with an edit button on the right side. By clicking "edit," you'll be able to enter and adjust the prepaid amount for the current year. This will be included on their 1099. Please note, this is only applicable for contractors and NOT employees.

More about 1099 filing, and what's required if you weren't using Justworks

Read more on our blog: Stop Wasting Time with 1099


This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, legal or tax advice. If you have any legal or tax questions regarding this content or related issues, then you should consult with your professional legal or tax advisor.
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