Employee or Contractor?
The Internal Revenue Service (IRS) uses a series of definitions and criteria to determine whether an individual is an employee or an independent contractor. Generally, if the individual is an employee, you must withhold taxes from his pay and you might be subject to other regulations, depending on the state in which you live.
According to the IRS, before you can determine how to treat payments you make for services, you must first know the business relationship that exists between you and the person performing the services. This person could be …
◆ An independent contractor
◆ A common-law employee
◆ A statutory employee
◆ A statutory nonemployee
The relationship often boils down to the degree of control you have in ...