Make sure they don't qualify for this exclusion --

"Effective for payments after December 31, 1997, the Congress amended section 1402 of the Internal Revenue Code to provide an exclusion from SECA tax for payments if they met certain requirements under new section 1402(k). These requirements are:

The individual receives the amount after termination of his or her agreement to perform services for the company

The individual performs no services for the company after termination

The individual enters into a covenant not to compete against the company, which applies to at least the 1-year period beginning on the date of such termination, and

The amount of the payment --

Depends primarily on policies sold by or credited to the account of the individual during the last year of his or her agreement or the extent to which such policies remain in force for some period after such termination, or both

Does not depend to any extent on length of service or overall earnings from services performed for the company (without regard to whether eligibility for payment depends on length of service)"