Texas First Hire

How to Hire an Independent Contractor

By Jeremy Kenerson, Founder and CEO at DeskTeam360

Last updated . Every number on this page was checked October 2, 2026.

To hire an independent contractor, check the worker's status first, get a Form W-9, put the work in writing, pay the invoices, and file Form 1099-NEC once the year's payments reach $2,000. That $2,000 line is for tax years that begin after 2025. The IRS says a business generally has no taxes to withhold or pay on what it pays an independent contractor. A test decides who counts as one, and the IRS says what can happen when a business gets it wrong.

This page is a plain reading of the rules. It isn't legal or tax advice.

How do you hire an independent contractor?

You hire an independent contractor in five steps: check the status, get a Form W-9, put the work in writing, pay the invoices and keep records, and file Form 1099-NEC if the payments call for it. The status check comes before any form.

  1. Check the status. The IRS and the Texas Workforce Commission each have a test for who counts as a contractor. The IRS says to write down each factor you used to reach your answer, so keep your notes. For who counts as a contractor, see independent contractor vs employee.
  2. Get a Form W-9. The IRS calls this the first step once you've made the call that the person is an independent contractor. The contractor fills the form out, and you keep it in your files for four years.

  3. Put the work in writing. Write down:

    • what will be delivered, and what "done" looks like
    • the due dates
    • the price, and how and when you'll pay
    • who supplies the tools and pays the expenses
    • how either side can end the work

    Ask an employment lawyer to read the contract. A contract doesn't settle the status. The Texas Workforce Commission says a written or oral agreement between you and your worker doesn't change an employee to an independent contractor.

  4. Pay the invoices and keep records. Keep a record of every payment you make to the person during the year.

  5. File Form 1099-NEC if the payments call for it. The IRS instructions say to file one for each person you paid $2,000 or more in the year, for tax years that begin after 2025. The form is due on or before January 31.

The taxes differ by status. If the worker is an employee, the IRS says a business generally must withhold taxes and pay the employer's share too. If the worker is an independent contractor, the IRS says it generally doesn't have to do either. The tests in step 1 decide which set of rules applies to your worker.

One note from the person whose name is on this page. In Jeremy Kenerson's experience, most first hires for small businesses, entrepreneurs and agencies are contractors, not employees. That's one owner's view, and no statistic backs it. The two tests still decide each case.

Two close cases have their own pages. For part-time help either way, see part time employee vs independent contractor. For a contractor outside the US, see hire overseas workers.

Can you hire 1099 employees?

You can bring on an independent contractor and report the pay on Form 1099-NEC, but the Texas Workforce Commission's employer guide lists terms such as "1099 employees" or "contract labor" among the red flags its tax examiners look for.

The "1099" is Form 1099-NEC, the form a business uses to report nonemployee compensation. The IRS says that, generally, wages and other pay to employees don't go on that form. They go on Form W-2. So "1099 employee" joins two words that don't go together. People use it for a worker whose pay is reported on a 1099.

The form doesn't decide who is a contractor: the facts of the whole working relationship do, under the IRS's test.

For the forms next to a W-2, see 1099 vs W-2.

A hire is one way to get work done. For production work, an outside team is another. DeskTeam360, the company that runs this site, offers a team for a flat monthly price. Every plan includes the full team. It doesn't do payroll. Texas First Hire gives no payroll, legal or tax help either.

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What forms do you need to hire an independent contractor?

The IRS's page on contractor forms starts with two: Form W-9 at the start, and Form 1099-NEC once the year's payments reach the reporting amount. The IRS instructions set that amount at $2,000 for tax years that begin after 2025. A third, Form 945, must be filed if a payer is required to deduct backup withholding.

Table: The IRS forms for an independent contractor. Sources: IRS pages and form instructions, read October 2, 2026.
Form Who fills it out When What it does
Form W-9 The contractor fills it out and gives it to you At the start. The IRS calls it the first step once you've decided the person is an independent contractor It asks for the contractor's correct name and taxpayer identification number. Keep it in your files for four years
Form 1099-NEC You, the business On or before January 31. If that day is a weekend or a legal holiday, it's due the next business day It reports nonemployee compensation. File one for each person you paid at least $2,000 during the year, for tax years that begin after 2025
Form 945 You, the business If you were required to deduct backup withholding Its full name is Annual Return of Withheld Federal Income Tax

The IRS also says this about these forms:

  • The $2,000 amount may be adjusted for inflation starting in 2027.
  • There are cases where a payer must hold back 24 percent of a payment. That's called backup withholding. One case is when the payee didn't give a correct taxpayer identification number.
  • Forms 1099-NEC must be e-filed by filers of 10 or more information returns in a calendar year.

Form W-9 is the form that asks for the taxpayer identification number. Its full name is Request for Taxpayer Identification Number and Certification.

Not legal or tax advice. Ask your accountant.

What happens if I hire an independent contractor and the IRS says it's an employee?

If the IRS finds that a worker you paid as a contractor is an employee, it says you may be held liable for that worker's employment taxes when you had no reasonable basis for the call, and the Texas Workforce Commission says a wrong call can mean increased taxes, penalties and interest charges. For who decides an unclear case, and how long the IRS says that can take, see independent contractor vs employee test.

That's why the status check is step 1. If you're unsure, ask your accountant before the first payment.

If the tests point to an employee, the hiring steps change. The first-hire steps page lists each one in order, with the Texas office, form and deadline.

More on employee or contractor

Ask on a call with DeskTeam360 whether a team fits the production work you'd give a contractor.

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Sources

All checked October 2, 2026.

This site isn't connected to the State of Texas or any government agency.

What changed

  • October 2, 2026: First version of this page.