1. Money
You can opt-out at any time. Please refer to our privacy policy for contact information.

Getting Ready to Prepare and Distribute W-2 Forms

By

1 of 8

First, Make Sure You Have Correctly Classified Workers as Employees

Classifying Workers - Employee or Independent Contractor?
It's sometimes difficult to tell if a worker is an employee or independent contractor, but the IRS requires that workers be classified correctly and the IRS can impose fines and penalties on companies who fail to classify workers correctly.

An employee is a worker who performs work at the direction of an employer. In general, anyone who performs services for an organization is an employee if the organization can control what will be done and how it will be done.

On the other hand, an independent contractor is an individual or business that provides services to another individual or business. The independent contractor is a separate business entity and is not considered an employee. Some examples of independent contractors are consultants, agents, or brokers. The work of independent contractors is often incidental or not essential to the business; for example, a cleaning service, payroll processor, or IT service.

Read more about classifying workers as employees or independent contractors, and consult an employment attorney for assistance.

©2014 About.com. All rights reserved.