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There are several tests to determine whether one is an independent contractor or an employee -- there certainly can be gray areas. Some employers would like to treat all their employees as independent contractors -- makes their accounting simpler and shifts all the tax burden to the employees.

Some of the tests (more "yes" answers indicate more independent status):

Does your wife set her own hours?
Does your wife purchase, maintain, and control the equipment she uses?
Does your wife decide how she does her job, or must she follow procedures dictated by the employer?

In other words -- who controls when and how she does her work? If the employer only says, groom x number of dogs -- and she sets the times, uses her own clippers and combs, and does the grooming her way -- sounds like an independent contractor. If the employer sets her hours, provides all the equipment, tells her what dogs to groom and how to groom them -- sounds like an employee.

Your wife will have to pay self-employment tax if her net earnings are more than $400.
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