What are the differences between an employee and an independent contractor?
A. The federal and state tax authorities determine whether an individual is subject to employment taxes on a case by case basis, using facts and circumstances and comparing them to tax regulations and definitions. In general, an independent contractor is someone hired by you who is not engaged in the same business as you, does not work exclusively for you, and is not under your control or supervision. They should bill you regularly in a professional manner, have business cards, maintain a business address, telephone number or web address, be registered and pay taxes with the state they operate in, and otherwise conduct their business in a manner consistent with a legitimate self-employed individual. If there is any doubt as to these facts, the tax authorities are likely to reclassify these persons as employees and assess tax for unreported payroll.
