Massachusetts Payroll: Employees vs. Contractors

Posted on August 1, 2023

payroll massachusetts

Running a small business is rewarding, but it can also be difficult. You have a lot of things to think about and coordinate, and your employees and relying on you just as you rely on them. Depending on what kind of business you run, you may also have contractors or freelancers as well as employees. The nature of your working relationship with employees and contractors is different, but that’s not where the differences stop. Payroll, tax preparation, record keeping, and labor laws apply to employees and contractors differently, too. We know it can be confusing. That’s why ABC Payroll is here to help you sort out your Massachusetts payroll and tax prep. 


Let’s take a look at how you handle the differences between employees and contractors relating to Massachusetts payroll.


Payroll Taxes and Reporting

When it comes to payroll taxes, employers are responsible for withholding taxes from their employees’ wages. These taxes include federal and state income taxes, Social Security tax, Medicare tax, and unemployment tax. Contractors are basically their own small businesses, so they are responsible for paying their income taxes and self-employment taxes directly to the government. The employer, therefore, does not withhold any payroll taxes from a contractor’s pay.

The way you report wages and withholdings is also different from employees and contract workers. Employers have to file W-2 forms for each employee with all the required information. For contractors, the employer has record information on everyone who worked for and received compensation from them. At the end of the year, the employer will issue a 1099-MISC to every contractor who was paid more than $600.


Benefits and Protections

In the United States, employees are entitled to certain benefits from their employers, such as health insurance and paid time off. They are also protected by labor laws and regulations, including minimum wage laws, overtime requirements, and workplace safety standards. Contractors, however, are not entitled to these same benefits and protections. For the purposes of tax laws, contractors are considered independent business entities and are, therefore, responsible for their own business compliance obligations.


Handle Massachusetts Payroll with ABC Payroll

Payroll requirements in Massachusetts can be complex, and it can be hard to keep up with changing state and federal laws. Instead of stressing about getting it all right, have our team at ABC Payroll handle it for you! You’ll have access to our accountants and payroll experts, who are ready to answer all your questions.


Contact us at 978-251-3003 to learn more about what we can do for your business.