Legal - Employment Legal Issues
IRS Independent Contractor Guidelines

IRS Independent Contractor Guidelines

An independent contractor is someone who performs a service for your business, but is not considered to be an employee by federal or state tax authorities.

When you use the services of an independent contractor you do not have to pay employer taxes, process payroll checks, and withhold employee tax shares on behalf of the contractor. You may also have less potential legal liability when these services are no longer required.

In the United States, however, the IRS and state revenue departments are vigorously trying to minimize lost revenue by carefully examining the status of “independent contractors” at many firms. If your “independent contractors” are deemed employees by the tax authorities, you could be forced to pay back taxes, employee benefits, interest, and penalties.