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Chapter 2. Setting Up and Using Payroll ... > Employees Versus Independent Contrac...

Employees Versus 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 who you pay for services and from whom you deduct taxes, sending that money on behalf of the employee to state and federal tax agencies. Independent contractors, on the other hand, are people you hire to do a particular job and are not your employees. You don't withhold taxes from their paychecks.

Sometimes determining whether someone who works for you is an employee or an independent contractor is difficult, so the IRS has attempted to simplify the process of distinguishing one from the other. The IRS has published a list of 20 questions to help determine whether a worker is an employee or a contractor. There's no set number of right or wrong answers that determines how to classify the worker. Generally, the more positive answers you give to these questions, the more likely the person is an employee rather than an independent contactor:


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