Business Tip of the Week: Employee vs. Independent Contractor

It is critical that business owners correctly determine whether the individuals providing services are employees or independent contractors. Independent contractors are people who are in business for themselves. Employees work for someone else’s business.

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.

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