Determining worker status

Be careful with this one. The classification of a worker as an employee or independent contractor does not turn on the parties' preferences, but rather on the terms of the relationship. The IRS identifies a number of employee indicators, largely based on the degree of control the company exercises over a worker's activities.

For example, if the company has the right to say when, where and how the work is performed, then the company is in control and the worker is an employee, not an independent contractor. Generally, an independent contractor is a person in business for him or herself, performing work for more than one customer and hoping for a profit from these activities.

Beware: Both the IRS and your state look closely at worker classification and the tax payments and penalties resulting when a worker is reclassified as an employee can be significant.