How do we classify a worker as an employee vs. subcontractor?
The IRS has a number of tests.
1) The most important of which is who controls the worker? Does the worker control his own work or where he/she has to go or does the business owner.
2) Does the business control the financial aspects of the the worker or the worker himself?
3) Are there written contracts which provide for the ability of the worker to work for others or does the work only work for one organization?
If in a situation, a worker does not have control and only works for one entity, then he/she is an employee and the employing organization must withhold taxes from his salary and provide a W-2 to that person at year end, as well as pay payroll taxes on his wages.
There are times when a properly executed contractor agreement will keep a business from treating the worker as an employee.
