That’s one of the most vexing questions for the business owner. Is your staff employees, or can they be classified as independent contractors? The IRS has a webpage devoted to helping taxpayers make the classification choice.
Employers must withhold payroll taxes from employees, and match some of those taxes (FICA) and pay additional taxes (FUTA & SUI). However, independent contractors are responsible for their own taxes. There’s a benefit to companies to have personnel as independent contractors rather than employees.
However, California has its own rules. And it’s harder to be considered an independent contractor in California. California has a 24-fact test to determine whether someone is an independent contractor or an employee (it’s available here).
FedEx has classified its ground delivery personnel in California as independent contractors. EDD ruled that they’re employees. FedEx has appealed the ruling. The potential liability is $7.8 million.