Do employers pay payroll taxes on payments made to independent contractors?

Employers do not pay payroll taxes on payments made to independent contractors. This is because independent contractors are considered self-employed individuals and are responsible for their own tax obligations, including the payment of Social Security and Medicare taxes. Unlike employees, for whom employers must withhold a portion of wages for payroll taxes, independent contractors receive their full payment without any deductions for these taxes.

This distinction is important as it reflects the different legal classifications of workers. When engaging independent contractors, businesses avoid the additional costs associated with payroll taxes, which can significantly impact the overall expense of employing traditional staff.