Do You Have Employees or Contractors?

    Employee, contractor, tomato, tomatho, potato, potatho, let's call the whole thing off!  Okay, so it sounds a lot cuter when Fred Astaire and Ginger Rogers do this, but we have a lot of our clients that seem to get employees and contractors confused.  And some of them do this because they want to avoid paperwork, taxes, overtime, and other headaches that can come with having employees.  This becomes an issue, with the IRS, since they have reason to believe that not all contractors pay their taxes appropriately.

    However, it is not up to the employer to choose one over the other.  The general rule is that an individual is an independent contractor if the payer has the right to control or direct only the result of the work and not what will be done and how it will be done. The earnings of a person who is working as an independent contractor are subject to Self-Employment Tax and they have to take care of that personally.

Below are the general characteristics of employees and independent contractors:

Independent Contractor ·         Free from direction and control ·         Has necessary skills and training to complete job ·         Has a business location ·         Performs services for multiple customers ·         Sets own hours ·         Determines own price for contracted services ·         Not eligible for employee benefits ·         Provides equipment and tools used to complete job ·         Supplies materials needed to do job ·         Personally liable for errors and/or accidents ·         Files self-employment taxes ·         Has right to hire and fire workers ·         Must legally complete each contract

Employee ·         Means and manner of work are (or can be) controlled by employer ·         May be trained by employer to perform job ·         May work at employer’s business location ·         Works for one employer, may serve that employer’s customers ·         Hours set by employer ·         Accepts wage, salary, or commission determined by the employer ·         Employer may provide and control equipment and tools ·         Employer may purchase materials and supplies ·         Employer liable for employee errors and/or accidents ·         Is hired and can be fired by employer ·         May quit working for an employer at any time ·         Employer may require specific attire to be worn while at work such as a uniform or shirts with company logo

So if looks like a duck, waddles like a duck, and quacks like a duck, don’t call it a contractor.  To avoid these types of issues give a us call or email.