Do not pay or withhold any taxes on an IC’s behalf. Doing so is a very strong indicator that the worker is an employee. Indeed, some courts have held that workers were employees based upon this factor alone.
Include a straightforward provision, such as the one suggested below, to help make sure the IC understands that he or she must pay all applicable taxes.
Suggested Language
State and Federal Taxes
Client will not:
- withhold FICA (Social Security and Medicare taxes) from Contractor’s payments or make FICA payments on Contractor’s behalf
- make state or federal unemployment compensation contributions on Contractor’s behalf, or
- withhold state or federal income tax from Contractor’s payments.
Contractor shall pay all taxes incurred while performing services under this Agreement—including all applicable income taxes and, if Contractor is not a corporation, self-employment (Social Security) taxes. Upon demand, Contractor shall provide Client with proof that such payments have been made.