Contractor Claiming Unemployment

Location: We are a 2 person zero cashflow startup incorporated in Delaware, our home office is in California, contractor lives in Massachusetts.

Context: We found an engineer on LinkedIn that had his own corporation listed as his job. We hired the engineer as a part time hourly 1099 contractor under his own SSN. We are new to this and in hindsight should have asked him to use his corporate ID number instead of his SSN.

Immediately we noticed he is charging hours of work without showing substantial work. We paid him for 8 hours and terminated his contract.

Two months later (today) we got an email from Tax Integrity (EOL) [TaxIntegrity@mass.gov](mailto:TaxIntegrity@mass.gov) claiming that they have someone that is claiming to be an employee of us that is claiming unemployment and asked us to fill out a detailed questioner. He is the only guy we had doing work from in Massachusetts.

Question:

1. The questioner is asking "Do you pay individuals for work they do in Massachusetts?" My partner and I don't agree on how we should answer. I say we paid an individual, my partner says we paid a contractor. Are the two not the same in this case since we paid his SSN?
2. We have pdfs of his LinkedIn calming to be a contractor, the contract he signed, and the 1099 form he filled out. Should we send these pdfs along with our reply to the email?
3. How screwed are we and what should we do?

We worked really hard to get this small startup started and put a lot of our own money into it and won't be able to survive a massive financial hit.