Get it Right! Independent Contractors vs. Employees
As an employer, you are required to correctly classify those who do work for you as either an independent contractor or an employee. According to StartUpNation.com, the government is looking closely at businesses to make sure workers are not being misclassified. Many businesses prefer to hire workers as independent contractors to save time and money. However, StartUpNation.com says a businesses' preference is not the determining factor — how much control a business has over a worker is. Ultimately, the IRS wants you to classify your employees correctly. When the IRS speaks, we listen, and advise you do the same. So let's get it right!
Independent Contractors
In summary, an independent contractor is: classically a one-time worker who does a job for a fixed priced, someone who generally works for multiple companies, and someone who can't be controlled with detailed direction. � The American Bar Association
If an employee is/does all of the following, they are also truly and should be classified as an independent contractor, according to Entrepreneur.com:
As an independent contractor, workers are self-employed. For tax purposes, you must provide them with a 1099 form. Additionally, independent contractors have a defined relationship that typically ends when services are completed or when terms are met, as illustrated in a contract. They cannot be fired providing produced results measure up to the terms outlined in a contract.1
Employees
Unlike independent contractors, in summary, an employee is someone who performs services for you if you can control what will be done and how it will be done. With employees, you have the right to control the details. -As defined by the IRS. Miami Dade College's Human Resources Department reported: an employee is required to comply with instructions about where, when, and how to work. Instruction may be oral or written.
If you hire employees, you must:
When you hire someone as an employee, a best practice is that you provide he or she with training by an experienced staff member. Employees also have set hours of work as established by you, the employer. Plus:
What happens if you misclassify? The government loses revenue, and as a result, it could cost you money. So, get it right! For more information on worker classification, visit the IRS website. For help filling positions at your company, contact us.
Sources: 1Miami Dade College, 2The American Bar Association and Entreprenuer.com.