You can determine when to issue a W-2 or a 1099 with just answering some questions. Employees will receive a W-2 are for wages paid, income taxes and FICA taxes withheld. Who is an employee? An employee is someone who enters into a work relationship with an employer. The employer has control of what work will be done and how it will be done. If the person meets this criteria they are an employee and therefore, are entitled to a W-2 for wages earned and taxes paid.

An independent contractor on the other hand, will receive an 1099-misc. To determine if the person you are hiring is a independent contractor use the following criteria.

           Is the person free of direction and controls their performance.  

           The amount of training and instruction is another factor. Has the employer provided the individual with training to perform the job.

           Does the individual performs the services that they are contracted for, outside the usually scope of the business.

If the individual meets these criteria, they are a independent contractor and need to receive a 1099-misc. Independent contractors are treat as vendors and therefore are not part of the business payroll system. Never the less the independent contractor must provide a tax identification number (TIN) to the employer.