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Chapter 20. Paying Employees and Contrac... > Paying Employees Versus Paying Indep...

Paying Employees Versus Paying Independent Contractors

If someone is your employee, you pay his taxes as well as his wages. The complexity of setting up payroll encourages lots of businesses to work with independent contractors whenever possible. However, there are some tax issues at stake when you employ a contractor. Independent contractors are required to report their income to the IRS and pay tax on that income. You play a part in this process by providing your contractors with a record of the amounts that they receive from you. The IRS requires you to report independent contractor amounts of $600 or more per year on form 1099.

QuickBooks enables you to track all independent contractor payments and prepare the 1099 forms. This process is explored in detail at the end of this chapter.


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