To determines whether payroll tax (income taxes and FICA taxes) are withheld from the person's payment, it is important to distinguish whether an individual is an employee or an independent contractor.
The existence of a "employer-employee" relationship between tax payer and payee determines whether an individual is employee or independent contractor. Normally, an employee is under the direct supervision of their employer, who controls how tasks are completed. An independent contractor works on their own to achieve a specific goal.
Whether an individual is employee or independent contractor for income tax purposes, the courts have developed key tests to assist in this determination over years.
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