There are rules that govern how an employee is to be treated versus an independent contractor but one of the easiest ways to decipher the difference is, are employment taxes paid on your behalf during the year by you and your employer? How can you tell? If you receive a paycheck stub and it shows withholdings for federal and state income tax and social security and Medicare tax then yes, you pay employment tax as you go and are considered an employee.

If you work for the same guy everyday but he cuts you a check without withholding taxes then you are most likely an independent contractor, not a true employee for tax purposes. The form(s) that you receive at the end of the year will be different. If you are an employee then you would receive a W2 but if you are considered an independent contractor then you would receive a 1099-misc( or not in some cases, see self employed self help).

Form W2 = Employee where employment taxes are “paid as you go”

Form 1099-Misc or Income Statement = Independent Contractor or self employed person who should be adding in additional expenses and usually employment taxes due are paid when the return is filed.