Federal law prohibits individuals or businesses from contracting with an independent contractor knowing that the independent contractor is not authorized to work in the U.S. Hired On or Before Nov. 6, 1986 It is critical that business owners correctly determine whether the individuals providing services are employees or independent contractors. Generally, you must withhold income taxes, withhold and pay Social Security and Medicare taxes, and pay unemployment tax on wages paid to an employee. You do not generally have to withhold or pay any taxes on payments to independent contractors. Hiring an independent contractor to work in your business? The hiring paperwork for independent contractors is much simpler than for employees, with only a few documents needed, but these are important documents. Getting them at the beginning of the working relationship is a lot easier than when the job or contract is done, and you can't find