The IRS looks at behavioral control, financial control, and the relationship of the parties. Generally, if you control when, where, and how the work is done, they are an employee. Contractors usually have their own tools and work for multiple clients.

Employers must pay 6.2% for Social Security and 1.45% for Medicare (FICA), plus federal and state unemployment taxes (FUTA/SUTA). When you add the cost of health insurance premiums and 401(k) matches, the "burdened" cost is often 1.2x to 1.4x the salary.

This refers to internal costs your company incurs to manage the contractor relationship, such as software licenses you provide, project management time, or administrative processing of invoices.

Not necessarily. Contractors often charge 50% to 100% more per hour than an employee's base rate to cover their own taxes and benefits. For long-term roles, a full-time employee is frequently more cost-effective.

Risks include having to pay back taxes (employer portion of FICA), unpaid overtime, unpaid workers' compensation premiums, and heavy IRS penalties for every misclassified worker.

A full-time year is 2,080 hours. However, many contractors work fewer billable hours for a single client. Use 1,800 to 1,900 for a "full-time" contractor to account for holidays and administrative downtime.

Yes! We manage 1099-NEC filings for all your contractors at year-end, ensuring your business stays compliant with IRS information reporting requirements.