Publication 963 (Rev. October 1997) - Uncle Fed's Tax*Board

Determining Worker Status
NOTES
the individual performs or performed the services does not have control of the payment of
the wages, the term employer means the person having control of the payment of the wages
(refer to regulations 31.3401(d)-1(f)).
When a question is raised about the identity of the employer, all facts relating to the
employment must be considered. Copies of any statutory provisions relating to the relationship
should be reviewed. If there is any provision in a statute or ordinance (expressly or
implied) which authorizes the employment of the individual, and the individual is hired under
this authority, the individual is an employee of the State or of the political subdivision to
which the provision applies. If there is no statutory authority (expressed or implied), the
identity of the employer must be determined under the common law control test. Note,
however, that for the purpose of determining whether an employee’s services are covered
for Social Security under a Section 218 Agreement, the employer is always the person for
whom the individual performs services as an employee.
INDEPENDENT CONTRACTOR
If the worker meets none of the criteria previously described and you’ve determined that
the worker is an independent contractor. Federal income tax or FICA taxes are not withheld
from payments. Independent contractors are usually subject to the Social Security and
Medicare taxes imposed under the Self Employment Contributions Act (SECA). If at least
$600 during the year is paid to an independent contractor, a Form 1099-MISC must be filed.
The 1099-MISC identifies:
1. the type of payment,
2. the amount,
3. who made the payment,
4. who received the payment and,
5. backup withholding, if any.
File Form 1099-MISC with the IRS by February 28th. Send all Forms 1099 with Form
1096. The Forms 1099 are used to verify that the independent contractor reported the
payment correctly on her/his income tax return. Send a copy of the Form 1099-MISC to
each independent contractor by January 31, of the following year. Generally, filing a Form
1099-MISC for payments made to corporations is not required unless the corporation is
engaged in providing medical or health care services.
In order to complete Form 1099-MISC, the Taxpayer Identification Number (TIN) of
each independent contractor is needed. The independent contractor should complete a Form
W-9 when services are contracted.
In some circumstances withholding 31 percent income tax from certain payments may be
required. This is called back up withholding. It is required if:
1. a payee does not provide the payer with a taxpayer with a TIN,
2. IRS tells the payer that the TIN is incorrect,
3. IRS notifies the payer that backup withholding is required.
There is a line which is used to report backup withholding on Form 945. Refer to the
instructions on Form 945 as needed.
3-20 Federal-State Reference Guide (1997 Edition)