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My understanding is you need to issue a 1099 to anyone you employ and pay $600 or more per year who is an independent contractor and not an employee. That person must furnish you a SSN or Tax ID number. If you employ a person who doesn't qualify as an independent contractor, they are an employee and you are required to pay employment taxes and, depending on your state, workers' comp. You are also required to issue them W4's at the end of the year and you are required to ensure they are qualified to work in the US by being US citizens or having 1-9 documentation. There are guidelines to define the difference between an employee and a contractor.
Here's a question I have for my friend. He is on unemployment which covers almost all his critical expenses. He wants to get an under the table job to prevent himself from running up credit cards until he finds a real job that pays enough. If he works as an independent contractor, could the unemployment agency find out and stop his checks, or fine him?
I think that they would consider that fraud and that would be a federal offence.
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