Employee or Independent Contractor

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 SS–8, 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.

Important References

Publication 15A Employer’s Supplemental Tax Guide
Form SS–8 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