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Proper classification of workers has important tax implications for businesses. That's because employers generally have responsibilities related to federal income tax withholding and FICA and FUTA tax. Independent contractors, on the other hand, are responsible for reporting and paying taxes themselves.
The IRS recently released a fact sheet, entitled "Employment Taxes and Worker Classification" (FS-2007-27), outlining employers' responsibilities on those issues. In addition, it created a new form for employees who have been misclassified as independent contractors.
The ABCs of Worker Classification
Degree of control is a key factor in determining how to properly …