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Chapter 20. Paying Employees and Contrac... > Determining Employees and Independen...

Determining Employees and Independent Contractors

Part of the process of setting up your company in QuickBooks is choosing how to pay the people who work for you. Not everyone who works for you is an employee. QuickBooks defines employees as people that you pay for services, and from whom you deduct taxes, sending that money in the employee’s name to state and federal tax agencies. Independent contractors—people you hire to do a particular job—are not your employees, and you don’t withhold taxes from their paychecks. Additionally, do not consider yourself an employee of your own company unless you pay yourself via payroll accounts as you do all your other employees. A business partner is also not an employee, unless she or he is actually on the payroll.

Sometimes it’s difficult to determine whether someone who works for you is an employee or an independent contractor. The IRS has published a list of 20 questions to help answer this one question. The more positive answers you give to these questions, the more likely the person is an employee rather than an independent contractor. Following are the questions that you can ask to determine the status of someone who does work for you:


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