Contractor or Employee Records for a Wethersfield Small Business

What records does a Wethersfield business keep for a contractor and for an employee?

A contractor needs a short file; an employee needs a payroll trail. For a contractor, the IRS page on independent contractor forms says the first step is a completed Form W-9, kept on file for four years. After that it's an invoice and a payment record for every payment, and a running total per person for the year.

An employee brings registration with the state and payroll records for every pay period. Here are the two side by side.

Say you run a shop off the Silas Deane Highway. A designer who invoices you for a new logo and a part-time helper on the counter every Saturday are very different arrangements. The next section covers how Connecticut tells them apart, and why the label you give either one doesn't settle it.

How do you tell whether a worker is a contractor or an employee?

By how the work is done, not by what the paperwork calls it. The Connecticut Department of Labor treats a worker as an employee for unemployment purposes unless all three parts of its ABC test are met.

1. A: the worker is free from your direction and control, under the contract and in fact.
2. B: the work is outside the usual course of your business, or done outside all of your places of business.
3. C: the worker is customarily engaged in an independently established trade or business of the same kind.

The IRS looks at the same question through three categories: behavioral control over how the job is done, financial control such as who provides tools and whether expenses are reimbursed, and the type of relationship, including benefits and whether it will continue. The CT DOL itself calls the decision technical and complex, so ask the department or your tax professional about any worker you're unsure of. The IRS also offers Form SS-8 for a determination when it's still unclear.

What does a contractor's file need during the year?

The W-9 first, then one record per payment. Getting the W-9 at the start is far easier than chasing a name and taxpayer identification number in January.

In the books, each payment should sit against the contractor's name with the invoice it paid. That's what makes the year-end total a quick lookup rather than a search through bank statements. Brittany's services include accounts payable and receivable, and the scope of each service is set with her before work begins. The threshold matters here: the IRS instructions say Form 1099-NEC is generally filed for each person paid at least $2,000 for services in 2026, due January 31 of the following year, or the next business day if that date falls on a weekend or legal holiday. The same instructions say payments made with a credit or payment card, and certain third-party network transactions, are reported on Form 1099-K by the payment company, not on your 1099-NEC. So record how each contractor was paid, and leave which payments get reported to your tax professional. The IRS also says the threshold may be adjusted for inflation from 2027, so check it each year.

What records does an employee add to the books?

A payroll trail for every pay period, which a contractor never needs. Registration with the state comes first, and this guide to what changes when you hire your first employee covers those steps.

From then on each pay period leaves records behind, and the books should agree with them. Employers in the state's CT Paid Leave program also deduct contributions and remit them quarterly, as the CT Paid Leave Authority's employer page says, which this guide to CT Paid Leave deductions in the books walks through. Brittany offers payroll support for the records and transactions connected to payroll, and which payroll tasks she takes on is agreed with her before work begins.

How long should you keep these records?

Both rules start at four years, but they're measured differently. The IRS says to keep a contractor's W-9 for four years, and to keep employment tax records for at least 4 years after the tax becomes due or is paid, whichever is later. Keep each year's contractor file and payroll records together with that year's bank statements.

If you're starting out in Wethersfield, the town has its own first-year asks too, such as the Assessor's New Business Questionnaire. There's more on those on Brittany's Wethersfield page.