How to Select a IRS Contractor

 

 

I have discovered that a majority of business owners are classifying their employee or contractors, which could create serious trouble in the future.  We answer this question by taking a look at substance over form, i.e. the true job, not what duties are written on paper process server west Sacramento.
If you surf the IRS website, you'll realize that the IRS sets forth a general rule for specifying an independent contractor.  The IRS website states "that the general rule is that a person is an independent contractor if the plaintiff has the right to control or direct only the result of the work and not what will be done and how it will be carried out."  This is a really wide definition and may be subject to interpretation.  Further, the IRS site says "that you are not an independent contractor if you perform services which can be controlled by an employer (what will be done and how it'll be done).  This applies even if you're given freedom of action.   Again, this can be subject to interpretation.

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So as a business owner, how can you be sure you are classifying your workers properly to avoid any unforeseen legal difficulties?  You must have a look at the facts of each situation, what the worker's job actually consists of.  Some of the factors to consider are: that directs the person's work?  Does he/she possess a boss or work independently?  Do you provide the equipment required for the occupation or does the worker?  Does the worker have a set schedule with set meal/break occasions or do they come and go as they please?  How are they paid?  Can they have a written contract with a start and end date?  Are any benefits offered to them?  Are they needed to report to somebody or just provide a finished product?  One example I like to use when seeking to distinguish between an employee and an independent contractor is as follows: Let's say you need your house painted.   You tell the painter they will need to paint between 9:00am and 5:00pm, and they could have an hour lunch and you'll provide the equipment for your occupation.  You will pay them for several hours worked.  This painter will likely be deemed your employee.  On the flip side, you hire a painter to paint your property.  You pay $3,000 for materials and labor and only care that the job is complete in two weeks.  This painter will likely be deemed a contractor.  Please know this is merely for example and is in no way meant to opine about the painting profession.
As you can probably tell, this is a really gray area of the law, however, one where includes high fines if not handled correctly.  Whether you are employing independent contractors or personnel is a factual matter, a query that needs to be answered from the start to prevent long-term trouble.  Do not take this lightly.  As a company owner, you should be working together with qualified legal counsel to help in the analysis and to save you money in the long run.

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