The problem of inappropriately classifying a worker as an independent contractor instead of an employee when the IRS categorize them, may result to liability of back taxes fines and interests. This common mistake of soaring cleaning companies that develop more clients, thinking that they can handle the rigors of payroll; they make a shortcut of having a worker as an independent contractor but if you mistakenly misplaced one of your worker then IRS will held you liable.
To get around the many rigid processes of putting an employee to its payroll, business usually catalog them as independent contractor. The advantage is that the duty to pay their taxes lies on the independent contractor themselves and for businesses it saves them time. On the other hand IRS established a stiff guide line to establish a worker to be an employee or a real independent contractor
To tell an employee to an independent contractor all rest in the employer. If the employer only dictated the outcome of the project and not the method on how the product or service was accomplished then the worker has a bigger chances of being an Independent contractor. On the other hand if the employer is the one to decide on the manner of how the work should be accomplished and state what the end result should be like or in other word has a total control of the project then the person will be am employee
The following are some pointers to ponder if you should categorize your worker on either
1. If the person has a prescribed process on how to finish the job, the manner on how to conclude a task rest in the hand of an independent contractor
2. Giving training to an individual for a job makes him an employee
3. A member of the staff has a vital part in the company then he will be an employee
4. Usually independent contractor have their own set of employee or subcontractors that do labor for them
5. Can you dictate the individuals schedule and hours, the time for work are usually set by independent contactors more often than not it depends on their contract with the vendor
6. The provision of supplies and equipments all rest to the owner. Contractors bring their own tools and supplies for the job
7. Expenses and mileage are shouldered by the business. The liabilities for expenses are the responsibility of independent contactors though sometimes they may ask you for reimbursements.
8. Independent contactors have multiple clients
9 does the capacity to remove a worker lies to the company or they can go anytime they want? A contract bounds an independent contactor and can only be removed if the were not able to meet the contracts standard
10. Does your worker own an office? A phone line devoted for their business is a clear sign that they are independent contactors not employees.
Being able to establish a laborer as independent contactors you should solidify you stance by accomplishing the following
1. Make sure that you will create a contract or any convention into paper sure that it will contain, the project description, the length of the work, and the cost of the contract include a clause that will attest that the person is an independent contactors
2. Accomplish a w-9 form from the contractor and organize you 1099 misc form
3. When they surrender an invoice to your office, then that’s the time you should pay them
4. Alteration in any form, budget constraints as well a the time factor issues should be addressed into writing
5. A documented proof of insurance should be submitted by the independent contactor
6. Don’t recompense them in an hourly basis.
If in doubt on the status of your worker make sure you submit ss-8 forms to the IRS this is for worker status determination.
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