The federal government considers any person under your direction or control an employee (i.e., to whom you supply an office, dictate hours and/or conditions, etc.). As such, withholding, as well as employer taxes (e.g., FICA SUI and FUI), are due on wages and taxable allowances, etc. If the employer fails to comply, potential liabilities exist for all unpaid federal/state/municipal taxes. In addition, penalties and interest may be levied. Even if the income is reported on a 1099 form, there would be no relief from these obligations if the individual is deemed an employee. Therefore, EP does not pay independent contractors.