How do I hire interns legally and what if they are out of school? Does that make a difference?
Answers
Interns either need to be paid minimum wage OR are receiving credits from an accredited Educational institution (they, under this option need to be doing a real job, not just be a gopher).
Echoing Wayne, the companies that I've had that work heavily with interns always w-2 them. On occasion I have had people do piece work under 1099s, but those really aren't interns at all (remote, self-managed, etc).
Unpaid interns should be sponsored by an institution, so you have a contract with the institution, not the intern, not unlike hiring someone through a temporary work company.
Basically, don't let someone work in your office where you don't have a contract for that work.
You may want to read this: http://www.dol.gov/whd/regs/compliance/whdfs71.pdf
Another option to look at is work study programs. It is a very affordable way to engage with promising talent from leading schools.