Hiring Employees
Employee or Independent Contractor
An employer must generally withhold income taxes, withhold
and pay social security and Medicare taxes, and pay unemployment taxes on wages
paid to an employee. An employer does not generally have to withhold or pay any
taxes on payments to independent contractors.
Common-law rules. To determine whether an
individual is an employee or an independent contractor under the common law, the
relationship of the worker and the business must be examined. All evidence of
control and independence must be considered. In any employee-independent
contractor determination, all information that provides evidence of the degree
of control and the degree of independence must be considered.
Facts that provide evidence of the degree of control and independence
fall into three categories: behavioral
control , financial control, and the type of relationship of the
parties.
Determination of Employee Work Status for Purposes of
Federal Employment Taxes and Income Tax Withholding.
IRS help. If you want the IRS to determine
whether a worker is an employee, file Form
SS8, Determination of Employee Work Status for Purposes
of Federal Employment Taxes and Income Tax Withholding, with the
IRS.
Industry
Examples
Individual Taxpayer Identification Number (ITIN).
Form
W-9 is used by persons required to file information returns
with the IRS to get the payee's correct TIN. For individuals, the
TIN is generally a social security number (SSN).
Show the full name and address as provided on
Form W-9 on the information return filed with the IRS and on the
copy furnished to the payee.
An employer must generally withhold income taxes, withhold and pay
social security and Medicare taxes, and pay unemployment taxes on wages paid to an
employee. An employer does not generally have to withhold or pay any taxes on payments to
independent contractors.
Important References
Publication
15A Employers Supplemental Tax Guide
Form
SS8 Determination of Employee Work Status for Purposes
of Federal Employment Taxes and Income Tax Withholding
Form
W-9 Request for Taxpayer Identification Number and Certification