Is That Person Working For You an Employee or an Independent Contractor?
This is an important distinction.

IRS Pamphlet

IRS Employer's Supplemental Tax Guide to Publication 15

Worker classification (W-2 employee vs. 1099 independent contractor) affects how the employer and employee handle employment taxes, social security and Medicare taxes, as well as how both the employer and employee file tax returns.  Employers, who incorrectly classify workers as independent contractors, could be exposing themselves to fines and penalties.

The courts have considered many facts in deciding whether a worker is an independent contractor or an employee.  These relevant facts fall into three main categories: behavioral control; financial control; and relationship of the parties.  In each case it is very important to consider all the facts – no single fact provides the answer.

Behavioral Control:
A worker is an employee when the business has the right to direct and control the worker.  The business does not have to actually direct or control the way the work is done – as long as the employer has the right to direct and control the work.

Financial Control:
The facts surrounding financial control show whether there is a right to direct or control the business part of the work.  Specific issues to consider are whether or not the worker has made a significant investment in his or her work, whether or not the worker pays their own expenses, and the opportunity the worker has for profit or loss.

Relationship of the Parties:
Certain facts illustrate how the business and the worker perceive their relationship, namely employee benefits and written contracts.