Your first hire: employee or subcontractor?

Whether your first hire is an employee or a subcontractor depends on how the work is done, not on what you call them. The IRS looks at three things: whether you control what the worker does and how (behavioral), whether you control the business side of the job, such as pay, expenses and tools (financial), and the type of relationship, such as benefits and whether the work is a key part of your business. A helper you schedule, train, equip and direct is likely an employee; a licensed trade who sets their own methods, brings their own tools and works for others is more likely a contractor.

This is general information, not tax or legal advice. Ask your accountant before you decide.

How does the IRS decide?

The IRS groups the evidence into three categories and says no one factor stands alone:

1. Behavioral control: do you control, or have the right to control, what the worker does and how? Setting the hours, training them in your methods and telling them how to do each job points to employee.
2. Financial control: do you control the business side? Paying by the hour, reimbursing expenses and supplying the tools and truck points to employee; a fixed bid, their own tools and the chance of profit or loss points to contractor.
3. Type of relationship: written contracts, benefits, an open-ended arrangement and work that’s a key part of your business point to employee.

The Department of Labor has its own rules for the same question under the Fair Labor Standards Act, and your state may too. If it’s still unclear, you or the worker can file Form SS-8 and the IRS will determine the status, though it says that may take at least six months.

What does hiring an employee involve?

From the IRS’s list:

• An EIN. The IRS lists having employees as a reason you need one.
• Form I-9: you verify the identity and work authorization of everyone you hire.
• Name and Social Security number, for the Form W-2 you’ll file.
• Form W-4, signed when they start, for federal income tax withholding.

Then payroll: withholding, employment taxes and their filings. Your state adds its own steps; its labor and revenue departments list them.

What does paying a subcontractor involve?

• A Form W-9 before the first payment, so you have their correct taxpayer ID.
• A Form 1099-NEC after the year ends if you paid them enough. For payments made in 2026, the IRS threshold is $2,000; before 2026 it was $600.
• Their proof of license and insurance, if your trade requires it. That’s good practice, not an IRS form.
• A written agreement that matches how the work really happens: their methods, their tools, a price for the job.

How do you choose?

Ask how you want the work done. If you want someone who shows up when you say, does it your way and drives your truck, plan for an employee and the payroll that comes with it. If you need a licensed electrician for two days on a remodel, a subcontractor fits. Price both: an employee’s cost is the wage plus employment taxes and insurance; a subcontractor’s is their bid, with no payroll.

How does FieldFlow handle either one?

FieldFlow doesn’t run payroll. It does keep the work straight for both:

• Crew members get the crew app: their own visits with the address, the customer’s number and your notes about the customer, a timer to log their hours per job, and none of your pricing. The hours are there when you run payroll.
• Subcontractors get an email when you assign them a visit.
• Pay a sub and log it under the Subcontractors expense category, which maps to Schedule C line 11 on your profit and loss report.
• Adding people costs nothing. FieldFlow is $19/month for the whole business, crew and subs included, with a 90-day free trial. See the team features.

Questions owners ask

Can I just call my helper a subcontractor?

No. What decides it is how the work is actually done, not the label or the contract. The IRS looks at behavioral control, financial control and the type of relationship. A helper you train, schedule, equip and direct is likely an employee.

When do I have to send a 1099-NEC?

For payments made in 2026, the IRS reporting threshold is $2,000 paid to a non-employee for services in the year; for payments before 2026 it was $600. Ask each contractor for a Form W-9 before you pay them, so you have their taxpayer ID.

What do I need to hire an employee?

An employer identification number (EIN), a Form I-9 to verify the person can work in the US, their name and Social Security number for Form W-2, and a signed Form W-4 for withholding. Your state has its own requirements too; its labor and revenue departments list them.

What if I'm not sure which one my worker is?

Ask a tax professional. Either you or the worker can also file Form SS-8 to have the IRS determine the status, though the IRS says a determination may take at least six months.