How does an employer determine the employment status of a worker?
Unfortunately, the answer to this question is not a simple one. The determination is based primarily on subjective tests, or questions, around the amount of control the employer has over the worker. If the employer maintains "enough" control over the worker, then the worker is classified as an employee.
Generally, a worker is classified as an employee if the company can control what will be done AND how it will be done. A worker is classified as an independent contractor if the company can control what will be done but NOT how it will be done.
A simple example: Assuming you run a landscaping business installing sprinkler systems, you are likely to hire employees and direct them on how to complete a job. On the other hand if you want to install a new sprinkler system at your home, you hire a landscaping company and tell them what you want done, but not exactly how to do it. In this example the landscaping company is not treated by you, the homeowner, as an independent contractor for payroll tax purposes because an invoice is issued/paid instead.