Determining whether your workers are employees or contactors for tax purposes is important, as both involve different obligations for you as an employer.
An employee is an individual who provides services to your business in exchange for compensation but who is not self-employed. You generally have to withhold tax from payments you make to them.
A contract worker is an individual who is self-employed and has a contract with you to provide services. You don’t have to withhold tax from payments to a contractor unless you decide to enter into a voluntary agreement with them.
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