Payroll and Independent Contractors
Know The Rules
Can I write a cheque to someone that is not considered an employee but also does not have business or is not a contractor. He will take care of his own taxes.
The business wants to cut him a cheque because it was his referral and he did part of the job. Do I have to charge taxes?????
This is tough as it is a cross between an commission for a referral and a bit of casual labor.
It's important to know the rules surrounding:
(a) Employees vs Independent Contractors
(b) Casual Labour
If this were me, I'd cut the cheque (as an independent contractor I.E. no taxes withheld) but also go into his/her vendor profile and select the vendor as one who should receive a T4A
. (If you are in the State you would be issuing a 1099MISC
.)That way s/he will receive their T4A slip in February and be required to report the income on their tax return ... just in case they forgot or had no intention of doing so. Just a little push to stay honest.
Before you issue the cheque, click here
to find out what information you will need to complete your T4A. I'd make a form and have the person complete it and sign it BEFORE you release the cheque. The IRS has Form 4669
for this if you are in the States.