Tax Law (Questions About Taxes)/Contract labor


My husband has started his own construction business and has one person who is an independent contractor that is working with him. My question is this, does my husband pay any sort of taxes for the independent contractor or is he responsible for all taxes?

Short answer: Independent Contractors are responsible for all of their own taxes. Employer withholds nothing but reports payment at the end of the year on Form 1099-MISC.

Long answer: Be sure the worker qualifies as a sub-contractor. The IRS is cracking down on small employers that improperly classify workers as subcontractors that are really employees so they can avoid employment tax issues.

An independent contractor is someone who is responsible for getting a specific job completed in the way he sees fit. A contractor can hire his own people to do the actual labor. An employee is under the direction of the employer and must be the one that does the actual work (swinging the hammer, for example).

The construction industry is under particular scrutiny.  

Tax Law (Questions About Taxes)

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Randall Klein, MBA, EA


I am an expert in personal and small business taxation, including Forms 1040, 1120, 1120S, 1065. I can answer any type of tax question except those that are requesting help in illegal tax evasion. Tax avoidance is legal, however. I do not do offshore trusts, or opt-out of the tax system type of queries.


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