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Which kind of worker is this? W-2, 1099, family, or H-2A

Every person you pay falls into one of four boxes in LedgerBarn, and picking the right one drives their taxes, their forms, and what the app shows on their profile.

1. Why this matters before you type anythingThe Classification you pick decides which taxes get withheld, which boxes get filled on their year-end form, and whether they get a W-2 or a 1099-NEC. Getting it wrong means the wrong forms, the wrong taxes, and possible IRS penalties — when you're not sure, ask your accountant or email [email protected] before you save.
2. W-2 employee — the defaultIf you set their schedule, tell them how to do the job, and they use your tools/equipment, they're a W-2 employee. Leave Classification on "W-2." You withhold federal and state income tax plus Social Security and Medicare, and file a W-2 at year-end.
3. 1099 contractor — they control how the work gets doneIf someone runs their own business and you're really just paying for a result, not directing the work, set Classification to "1099 (contractor)." Picking 1099 immediately hides the Federal W-4 and State withholding sections, since contractors fill out their own W-9 and you don't withhold anything.
4. Family-exempt — a narrow, specific caseThis applies only when you're a sole proprietor (or a partnership where the only partners are the child's parents) paying your own child under 18. Set Classification to "family-exempt." Their wages are excluded from Social Security, Medicare, and FUTA by federal law — but they still owe regular income tax, so the W-4 and state withholding sections still show.
5. H-2A — foreign agricultural workers on the visa programIf someone is working under the H-2A temporary agricultural worker visa program, set Classification to "H-2A (ag visa)." This unlocks a green note and a set of contract fields — see the "H-2A / migrant farm workers" guide for what to do with those.
6. Setting it on the formGo to Books & Payroll → Employees, open the employee (or "+ Add employee"), and use the Classification dropdown: W-2, 1099 (contractor), family-exempt, or H-2A (ag visa). The rest of the form adjusts automatically based on what you pick.
7. You can change it laterIf someone's situation changes — a 1099 contractor becomes a regular employee, or your child turns 18 — reopen their profile and change Classification. This only affects pay runs going forward, not past paychecks already recorded.
8. When in doubt, ask before you run payrollMisclassifying a worker is one of the most common, and most expensive, payroll mistakes a small business makes. Check with your accountant or email [email protected] before the first payroll run for a new worker — it's far easier to get right from the start than to fix afterward.