Form 1099-MISC. is used to report payments of $600 or more for rents, commissions, fees, prizes and awards, royalties and other nonemployee compensation. They must be provided to the recipient by January 31st following the year in which the amounts were paid.  They must be transmitted to the IRS by March 31st following the year in which the amounts were paid.

If a independent contractor fails to submit a TIN (Tax ID Number), or the IRS otherwise requires it, backup withholding tax is required on payments made to the independent contractor at a rate of 28% (can change annually).

Misclassification, even unintentional, may have serious consequences.  Employers can be assessed 100% of the FIT (Federal Income Tax) and FICA (Social Security and Medicare) taxes that they fail to withhold. Be careful to qualify your independent contractors!  If an employer is unsure whether an individual is an independent contract, it may obtain a written determination from the IRS by submitting Form SS-8. However Oregon may have additional requirements to consider as well. See http://egov.oregon.gov/EMPLOY/TAX/IC/whatisIC.shtml for more information.