The presence of a master-servant relationship determines whether or not a principal must pay wage taxes and withhold income taxes.

Question

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The determination of a master-servant relationship is crucial in establishing whether an individual is an employee (servant) or an independent contractor. If such a relationship exists, the principal (employer) is responsible for paying wage taxes and withholding income taxes according to employment tax laws.

The Presence of a Master-Servant Relationship Determines Whether or Not