When hiring contractors for your farm or ranch, you’ll need to determine how to set them up in your payroll system—either as a business or as an individual. Whether the contractor is helping with fencing, equipment repair, or seasonal tasks like harvest support, getting their profile right in FarmRaise Payroll ensures proper tax reporting and compliance.
Important Note:
FarmRaise cannot provide legal or tax advice on whether a contractor should be set up as an individual or business. Contractors should consult with a CPA or tax professional if they are uncertain.
Two Key Questions for Setting Up a Contractor Profile:
Do You Offer Your Services as an Individual or a Business?
As a Business: If the contractor will file their 1099 under a sole proprietorship, LLC, or corporation, they would typically choose this option. For example, if you hire a contractor to install irrigation systems under their LLC, they would register as a business.
As an Individual: If the contractor plans to report their 1099 income on their personal tax return, they would select this option. This is common for independent contractors providing services like seasonal farm help or livestock care.
What Type of Tax Identification Number Do You Use?
Social Security Number (SSN): Format: XXX-XX-XXXX
If the contractor is offering their services as an individual (as described above), they would provide their personal SSN.Employer Identification Number (EIN): Format: XX-XXXXXXX
If the contractor is operating as a business, they will need to provide their EIN. This is typically used when the contractor is structured as a business entity, such as an LLC or corporation providing agricultural services like crop consulting or farm equipment leasing.
Need Help Deciding?
If your contractor isn’t sure whether to select individual or business status, they should reach out to a CPA or tax professional to ensure they are setting things up correctly for tax purposes. Getting this step right is important for proper 1099 filing and tax reporting.
By setting up your contractors correctly in FarmRaise Payroll, you’ll be able to streamline tax reporting, reduce paperwork, and stay compliant with IRS regulations—all while keeping your farm or ranch operation running smoothly.