Primarily for Tax purposes, a business owner must correctly determine whether individuals providing services are employees or independent contractors. If you are a business owner, you will want to review this information to determine whether individuals you hire are independent contractors or employees.
Generally, a business owner must withhold income taxes, withhold and pay Social Security and Medicare taxes, and pay unemployment tax on wages paid to an employee, but does not have to withhold or pay any taxes on payments to independent contractors.
Before a business owner can determine how to treat payments for services, the business relationship that exists between the owner and the person performing the services must first be established. The person performing the services may be:
Generally, a business owner must withhold income taxes, withhold and pay Social Security and Medicare taxes, and pay unemployment tax on wages paid to an employee, but does not have to withhold or pay any taxes on payments to independent contractors.
Before a business owner can determine how to treat payments for services, the business relationship that exists between the owner and the person performing the services must first be established. The person performing the services may be:
An independent contractor
An employee (common-law employee)
A statutory employee
A statutory nonemployee
In determining whether the person providing service is an employee or an independent contractor, all information that provides evidence of the degree of control and independence must be considered.
