Contract
Labor Personal
Tax
Your company has just won a major contract and you are anticipating
the need for some short term employees to get you through the crunch period. Since
these employees can work out of their home and set their own hours, you decide to pay them
as contract laborers instead of placing them on the payroll. Good
idea? Maybe not. With the downsizing that took place over
the last few years, the
IRS has seen an explosion of people being paid as outside contractors instead of
employees.
Determining the
classification between an employee and an independent contractor is not always easy, but
the IRS often uses the following tests in deciding cases:
Factors Indicating An Employee
Relationship Factors
Indicating An Independent Contractor Relationship Please keep in mind that the list above is not
"all-inclusive" and no one factor will usually determine the employer/contractor
ruling. Confusing? Certainly, but we can help guide you though some of the
issues whenever the need arises. Congress recognized the complexity of
this issue and granted some "safe haven" relief in the Small Business Protection
Act of 1996. You may qualify if you have historically treated certain employee
groups as contractors and can meet the requirements under the Act.
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