As a general rule, your obligation to withhold and to pay payroll taxes applies to any workers you have who are properly classified as being employees as opposed to independent contractors. Only in rare circumstances will a business be relieved from payroll tax obligations with respect to employees or be responsible for payroll taxes with respect to your independent contractors.
For payroll tax purposes, the IRS and the various state tax agencies rely on so-called common law rules to distinguish employees from independent contractors. Under these rules, your workers are employees if you have the right to direct and control them in the way they work, both as to the final results and as to the details of when, where, and how their work is done.
The important issue here is whether you have the right to control your workers' activities. Even if you grant your workers considerable discretion in determining how they do their work, as long as you retain the legal right to control their activities, the workers are common-law employees.
Obviously, there are innumerable ways in which you can exercise control over a worker. And, by no means is there a clear definition of just how much control on your part is enough to cause a worker to be classified as an employee rather than an independent contractor. Rather, each case depends on an analysis of its own particular set of facts. To help you with this analysis, the IRS has devised several aids:
Special rule for the securities industry. A special law provision
states that in determining the status of a registered representative of a
securities broker-dealer, no weight is to be given to instructions from the
broker-dealer which are imposed only to comply with government or governing body
investor protection standards. The law states that while it is effective as of
December 31, 1997, no inference is intended that it has not always been the