In my practice adviceing business owners, they always ask this question. What is the difference between an independent contractor and an employee? I found out that a majority of business owners inappropriately classified employees or contractors. This can cause serious problems. In order to answer such questions, we are looking at the substance on the form, ie the actual work.
When viewing the IRS website, the IRS provides general principles for cleaning independent contractors. The IRS website says, "Rather than deciding what the payment is and how it will be done, the payer has the right to manage and direct only the results of the work, the individual is an independent contractor There is a general rule that this is a very broad definition and may be subject to interpretation.In addition, at the IRS site, "When you run a service that employers can manage, you are independent What is done (what is done and how) is done by the contractor, how does the employer perform the service? " This may also be subject to interpretation.
As a business owner, how can you confirm that you are correctly classifying workers to avoid unexpected legal issues? You have to look at the facts of each situation, what kind of work do you do in fact? Some of the factors to consider are: Does he / she have a boss or working independently? Do you have facilities necessary for work? Do workers have a scheduled schedule with a set meal / break time or will they come and go as you wish? How are they compensated? Do they have written agreements on start and end dates? Are they given some profit? Do they need to report to someone or provide finished products? One example that you would like to use when trying to distinguish between an employee and an independent contractor is as follows. You hire a painter to do it. You tell the painter that you need to paint between 9 am and 5 pm, you can have lunch and serve supplies for work. You will pay them for all time labor. This painter is probably regarded as your employee. Meanwhile, you hire a painter to paint the house. You only pay 3,000 dollars for labor and materials, and I care that my work has been completed in two weeks. This painter is probably considered a contractor. Please understand that this is merely an example, and never expresses the opinion of painter specialists.
As you know, this is a very gray area by law, but if it is not handled correctly it will be fine. Whether you are hiring an independent contractor or employee is a matter of fact. To avoid long-term troubles, it is a question to answer from the beginning. Please do not take this lightly. As a business owner, you need to cooperate with a competent lawyer to help you analyze and save money in the long run.
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