Independent Contractors and Taxes

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 Independent Contractors and Taxes

The following is an excerpt from the article “Tax Facts for Business Owners.” For more information please visit

 Independent Contractor or Employee

It is critical that you, the employer, correctly determine whether the individuals providing services are employees or independent contractors. Generally, you must withhold income taxes, withhold and pay Social Security and Medicare taxes, and pay unemployment tax on employee wages. You do not generally have to withhold or pay any taxes on payments to independent contractors.

Generally, whether a worker is an employee or an independent contractor depends upon how much control you have as a business owner. The IRS uses three broad categories to determine this: behavioral control, financial control, and the type of relationship. Publication 1779,

Independent Contractor or Employee, provides guidance. If, after reviewing these categories, the determination remains unclear, you may file Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding and the IRS will determine the worker’s status.

If you have an independent contractor, you may be required to issue Form 1099-MISC for payments totaling $600 or more in a calendar year. Learn more about independent contractor or employee.

For more information, see Publication 15 Circular E, Employer’s Tax Guide.


Blog post courtesy of Merchants Insurance Group