This is the decision owners most want a quick answer to, and it is the one where a quick answer costs the most.
Whether somebody is an employee is decided by how the work actually happens, not by what the agreement says and not by what suits both of you. A signed contractor agreement does not make somebody a contractor, and a handshake does not make somebody an employee.
Who decides when the work happens, how it gets done and with whose tools? Can the person work for anybody else while they work for you? Is the arrangement open ended, or tied to a defined piece of work with an end to it?
Those answers point one way or the other long before any form does, and they are the answers anybody reviewing it later will be looking at.
If somebody should have been on the payroll and was not, the bill is the tax that should have been withheld, the employer side that was never paid, and penalties on top of both. It usually comes to light when the person files for unemployment, which is the moment you have least control over.
Plenty of genuine contractors exist and paying them is simple. The trouble comes from calling somebody a contractor because payroll felt like a hassle. If the hassle is the only reason, the answer is to set payroll up and stop worrying about it.
A straight answer for each person, the reasoning written beside it, and what to do about anybody who has been treated the wrong way so far.
The rows above are the shape of that list, with nobody's names on them.
Putting payroll in place is ordinary work and there's no CPA license at this desk. Assurance reports, audits, reviews and compilations stay with a firm that holds one.
We also don't run payday from here, and that's deliberate rather than a gap. The provider is yours, the login is yours, and the button is yours. If a bank wants a signed statement, you'll hear that before any calendar gets discussed. The longer version is on the disclosures page.
Source. The reserved-report rules at Texas Occupations Code sections 901.451, 901.453 and 901.456, read 29 September 2026 while writing about payroll setup.
The classification changes the deduction, the filings, the insurance and what has to go out at year end. Deciding it on its own and finding the rest out in March is the expensive order to do it in.
Breadth is one desk holding the payroll, the books and the return, so the answer is given once and everything downstream follows it. Height is the read that prices the decision before it is made rather than after.
I wanted a yes or a no. What I actually wanted was somebody to tell me what the wrong answer would cost.
Before the first hire, or after a year of guessing, either one is enough to start.
You will be talking to the Steven Palmieri practice.