Owning and operating a small business can become overwhelming when it comes to withholding and paying payroll taxes to the IRS. That is, an employer must withhold part of the employees pay, in form of income taxes, social security, and medicare taxes. It also has to pay unemployment taxes to the state. For this reason many companies decide to classify a worker as an Independent Contractor rater than an employee. But doing so incorrectly with no reasonable basis may make the employer liable for those taxes and penalties. It is therefore recommended that you seek advise of counsel prior to classifying your worker as an independent contractor. Whether a worker is an independent contractor or employee depends on the facts in each situation. The general rule is that an individual is an independent contractor if the payer has the right to control or direct only the result of the work, not what will be done or how it will be done. If you own a small business and employ someone else to perform work, consider seeking advice with THE VARGAS LAW OFFICE, for a consultation on the costs and benefits of classifying workers as Employee or Independent Contractor.