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An employer is a person or institution that hires employees or workers. Employers offer wages or a salary to the workers in exchange for the worker's service. Employers include everything from individuals to governments and big businesses which may hire many thousands of employees.

Tax considerations of being an employer

It is important for small business owners to understand the difference in utilizing the services of an independent contractor and hiring an employee, thus becoming and employer.

In the U.S., an employee is considered anyone who performs services for you as a business owner or manager if you can control what will be done and how it will be done. This is so, even when you give the employee freedom of action. The term is used by the U.S. IRS to determine the way in which income tax is collected from the individual. The general rule that will determine whether or not the IRS considers the worker an employee is whether or not you have the right to control the details of how the services are performed.

It is important for small business owners and managers to understand how to determine if a worker is an independent contractor or an employee.

See also

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