As a business owner, when another person performs work for you, you must first correctly classify that person as an independent contractor or employee before you can know how to treat payments that you make to that person.
The general rule is that an individual is an independent contractor if you, the person for whom the services are performed, have the right to control or direct only the result of the work, and not the means and methods of accomplishing the result.
If there is any doubt about the status of your employees or independent contractors, contact the IRS, Arizona Department of Economic Security, your workers’ compensation insurance provider, and an attorney or an accountant for professional assistance. (21)
Contact: Internal Revenue Service, 800.829.4933
Independent Contractor (Self-Employed) or Employee?
Contact: Arizona Department of Economic Security, Tax Audit Offices
Employment and Wages: Defining An Employee - Who Is An Employee?
IRS: Forms and Associated Taxes for Independent Contractors
IRS Publication 15-A, Employer’s Supplemental Tax Guide (Supplement to Publication 15 (Circular E), Employer’s Tax Guide) points out the differences between an independent contractor and an employee and gives examples from various types of occupations.