HomePagesTax Talk (Independent Contractor or Employee)

Canady and Canady P. C.

Certified Public Accountants

  • Generally, you must withhold income taxes, withhold and pay Social Security and Medicare taxes, and pay unemployment tax on wages paid to an employee.
  • You do not generally have to withhold or pay any taxes on payments to independent contractors.
  • In determining whether the person providing service is an employee or an independent contractor, evidence of the degree of control and independence must be considered.
  • Facts that provide evidence of the degree of control and independence fall into three categories:
    1. Does the company control or have the right to control what the worker does and how the worker does his or her job?
    2. Are the business aspects of the worker’s job controlled by the payer? (these include things like how worker is paid, whether expenses are reimbursed, who provides tools/supplies, etc.)
    3. Are there written contracts or employee type benefits (i.e. pension plan, insurance, vacation pay, etc.)?
    4. Will the relationship continue and is the work performed a key aspect of the business?

There is no “magic” or set number of factors that “makes” the worker an employee or an independent contractor, and no one factor stands alone in making this determination.

If you classify an employee as an independent contractor and you have no reasonable basis for doing so, you may be held liable for employment
taxes for that worker.

If you need assistance with any matters related to the independent contractor status, give us a call at Canady & Canady P. C. (713-783-1021) and ask for me, Jeff Canady.