Employer's Supplemental Tax Guide link 
The person performing the services may be: - An independent contractor, - A common-law employee, - A statutory employee, or - A statutory nonemployee.
** Independent Contractors **
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.
**Common-Law Employees** Under common-law rules, anyone who performs services for you is generally your employee if you have the right to control what will be done and how it will be done. This is so even when you give the employee freedom of action. What matters is that you have the right to control the details of how the services are performed.
**Statutory Employees** If workers are independent contractors under the common-law rules, such workers may nevertheless be treated as employees by statute (also known as statutory employees) for certain employment tax purposes. This would happen if they fall within any one of the following four categories and meet the three conditions described next under Social security and Medicare taxes. 1. A driver who distributes beverages (other than milk) or meat, vegetables, fruit, or bakery products; or who picks up and delivers laundry or dry cleaning, if the driver is your agent or is paid on commission. 2. A full-time life insurance sales agent whose principal business activity is selling life insurance or annuity contracts, or both, primarily for one life insurance company. 3. An individual who works at home on materials or goods that you supply and that must be returned to you or to a person you name, if you also furnish specifications for the work to be done. 4. A full-time traveling or city salesperson who works on your behalf and turns in orders to you from wholesalers, retailers, contractors, or operators of hotels, restaurants, or other similar establishments. The goods sold must be merchandise for resale or supplies for use in the buyer's business operation. The work performed for you must be the salesperson's principal business activity. See Salesperson in section 2. **Social security and Medicare taxes.** You must withhold social security and Medicare taxes from the wages of statutory employees if all three of the following conditions apply. - The service contract states or implies that substantially all the services are to be performed personally by them. - They don't have a substantial investment in the equipment and property used to perform the services (other than an investment in facilities for transportation, such as a car or truck). - The services are performed on a continuing basis for the same payer.
**Statutory Nonemployees** There are three categories of statutory nonemployees: direct sellers, licensed real estate agents, and certain companion sitters. Direct sellers and licensed real estate agents are treated as self-employed for all federal tax purposes, including income and employment taxes, if: - Substantially all payments for their services as direct sellers or real estate agents are directly related to sales or other output, rather than to the number of hours worked; and - Their services are performed under a written contract providing that they won't be treated as employees for federal tax purposes.
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