Form 1099-MISC & Independent Contractors
Question: How do you determine if a person is an employee or an independent contractor?
Answer is: The determination is complex, but is based on whether the person for whom the services are performed has the right to control how the person performs the services. It is not based merely on how the person is paid, how often the person is paid, or whether the person works part-time or full-time.
There are  3 three basic categories of factors that are relevant to determining worker classifications:
Behavioral control
Financial control and
Relationship of the parties
For more information on employer-employee relationships, refer to Publication 15, Circular E, Employer’s Tax Guide and Publication 15-A (PDF), Employer’s Supplemental Tax Guide.
If you would like the IRS to determine whether services are performed as an employee or independent contractor, you may submit Form SS-8 (PDF), Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding.
Generally you should report your non employee compensation on Form 1040, Schedule C (PDF), Profit or Loss from Business (Sole Proprietorship), or Form 1040, Schedule C-EZ (PDF), Net Profit From Business. You need to pay self-employment tax (comprised of social security and Medicare taxes) on your net earnings from self-employment on Form 1040, Schedule SE (PDF), Self-Employment Tax if you had net earnings from self-employment of $400 or more.
Generally, there is no tax withholding on this income as long as you provide your Taxpayer Identification Number to the payer. Thus, you may have been subject to the requirement to make quarterly estimated tax payments. If you did not make timely estimated tax payments, you may be assessed a penalty for an underpayment of estimated tax. Employees pay their half of the social security and Medicare taxes (i.e., FICA tax), as well as income tax withholding, through payroll deductions
Information taken from irs.gov site