{"id":7032740,"date":"2026-08-07T23:25:31","date_gmt":"2026-08-07T23:25:31","guid":{"rendered":"https:\/\/peraltafinancing.com\/accounting\/working-with-independent-contractors-business-guidelines\/"},"modified":"2026-08-07T23:25:31","modified_gmt":"2026-08-07T23:25:31","slug":"working-with-independent-contractors-business-guidelines","status":"publish","type":"post","link":"https:\/\/fivemor.com\/?p=7032740","title":{"rendered":"Working With Independent Contractors | Business Guidelines"},"content":{"rendered":"


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According to a recent study, one out of every 10 workers<\/a> is an independent contractor. With so many contractors making up the workforce, you\u2019re bound to work with or hire one at some point.<\/p>\n

Hiring contractors can be beneficial to your business. But if you\u2019re going to be working with independent contractors, you need to know how to do business with them.<\/p>\n

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What is an independent contractor?<\/h2>\n

So, what exactly is an independent contractor? An independent contractor is an individual who performs work for businesses. However, they are not considered employees. In many cases, independent contractors run their own businesses.<\/p>\n

Unlike employees, independent contractors do not have Social Security or Medicare taxes deducted from their pay. Instead, they pay their own income tax and self-employment tax<\/a> on their earnings.<\/p>\n

The IRS and FLSA have strict rules for determining whether or not a worker is an employee vs. independent contractor<\/a>. Before you determine a worker\u2019s status, review the Fair Labor Standards Act\u2019s and IRS\u2019s guidelines to avoid independent contractor misclassification<\/a>.<\/p>\n

7 Tips for working with independent contractors<\/h2>\n

If you hire independent contractors, you need to know the do\u2019s and don\u2019ts of working with them. Use the seven tips below to learn how to work with contractors.<\/p>\n

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1. Collect essential paperwork<\/h3>\n

Just like you would with employees, you must collect paperwork from your new contractors.<\/p>\n

Give your contractor Form W-9, Request for Taxpayer Identification Number, to fill out.<\/p>\n

Form W-9<\/a> gives you information about your independent contractor so you can accurately report their payments to the IRS. On the form, contractors must include information like their:<\/p>\n

All businesses must report nonemployee compensation of $2,000 or more (beginning in 2026, up from $600) to the IRS. Use the information on Form W-9 to help fill out IRS Form 1099-NEC at year-end.<\/p>\n

Do not send Form W-9 to the IRS. Keep Forms W-9 in your records for safekeeping.<\/p>\n

2. Establish an agreement or contract<\/h3>\n

Traditional employees have job descriptions that define their responsibilities. When working with independent contractors, you have to provide a different set of guidelines to establish rules and responsibilities. You can do this by creating an agreement or contract.<\/p>\n

Create an agreement outlining the project and your contractor\u2019s responsibilities. Contracts not only lay the groundwork for the project, but they also protect both parties. Not to mention, it doesn\u2019t hurt to have everything in writing.<\/p>\n

Your contract communicates how and when the project will get done. Typically, contracts include:<\/p>\n