How do I give a temporary employee a 1099 form?
You stated in your question that you had two employees work on one job only. Are these employees that did a side job or are they actually independent contractors that you mistakenly labeled as employees?
If they are employees, then it doesn't matter what job they did, they should be issued a W2 form and be treated as employees. But, if they are independent contractors and you didn't pay them more than $600, you are correct in stating that you don't have to issue them a 1099 form and it is their obligation to report the income on their tax returns.
If you are not sure if they are employees or independent contractors then you will have to review the IRS rules. Below I've provided some guidance on deciding whether or not they fall under the employee or independent contractor category.
The general rule is that an individual is an independent contractor if they, the person for whom the services are performed, have the right to control or direct only the result of the work and not the means and methods of accomplishing the result. If this is the case, then they should be considered independent contractors.
If you are still unsure, I've outlined some questions for you to ask yourself. If you answer "yes" to any of the questions below, then they are probably independent contractors.
1. Do they--rather than the employer--determine how the job is to be performed?
2. Are they paid by the job or project rather than an hourly wage or salary?
3. Are their services offered to the public and not just to one particular person, boss or business?
4. Do they use their own tools and equipment?
5. Do they determine the number of hours worked?
6. Do they have a contract stating that they will be paid as an independent contractor?
If the answer was "no" to the majority of these questions than you will want to ask yourself these questions:
1. Do they have set hours of work?
2. Are they paid in regular amounts at set intervals, such as an hourly wage, weekly salary, etc.?
3. Do they work at your workplace or home?
4. Can they be fired?
5. Do they receive training from you?
6. Do they have to follow specific instructions about how the work is to be done?
If you answered "yes" to the majority of the questions in this set, they are likely classified as an "employee."
I hope this information clarifies the confusion. Let me know if you have any additional questions.
Ryan Himmel, CPA and registered securities analyst, is the founder and CEO of BIDaWIZ.com, a professional network for small businesses and entrepreneurs to obtain trusted advice and services from a team of CPAs, Enrolled Agents, Financial Planners & Tax Attorneys. His team provides answers to the many finance and tax questions that small businesses encounter every day. Ryan has been quoted in The Wall Street Journal, Forbes, Fox Business and Crain's New York, among other publications. Ryan also regularly contributes to the community with his finance and tax blog.