Generally speaking, no. If an individual is an employee, they must be paid on a W2 and taxes must be withheld.
Also be careful.... just because you label someone as an "independent contractor" does not mean that they are. If you are improperly classifying an employee as an independent contractor, you could be liable for back taxes, penalties and interest for failing to withhold, failing to obtain workers' compensation insurance and potentially more. The determination as to whether an individual is an employee or independent contractor is a balancing test of many different factors, which an agency or court will look at.
Michael J. Davey, Esq.
Eckell Sparks Law Firm
344 West Front Street, Media, PA 19063
mdavey@eckellsparks.com (610) 565-3700
Answered on Aug 16th, 2012 at 3:51 PM