Employee v contractor checklist

Consider: Significant investment in the equipment the worker uses in working for someone else. Unreimbursed expenses, independent contractors are more likely to incur unreimbursed expenses than employees. Opportunity for profit or loss is often an indicator of an independent contractor.

This handy little checklist is a guide to help you determine whether an individual is an Independent Contractor. Employee vs Independent Contractors Checklist.

Generally, the more “yes” you have to the questions below, the more likely it is that the individual is an Independent Contractor. As always, please consult with your legal counsel before making any final decisions. What makes you an employee vs. Is your worker an employee or a contractor?

Are contractors employees? Can a contractor do the work? Under the common law, you must examine the relationship between the worker and the business.

You should consider all evidence of the degree of control and independence in this relationship.

See full list on irs. Facts that provide evidence of the degree of control and independence fall into three categories: 1. Will the relationship continue and is the work performed a key aspect of the business? Some factors may indicate that the worker is an employee, while other factors indicate that the worker is an independent contractor. There is no “magic” or set number of factors that “makes” the worker an employee or an independent cont.

The form may be filed by either the business or the worker. The IRS will review the facts and circumstances and officially determine the worker’s status. Be aware that it can take at least six months to get a determination, but a business that continually hires the same types of workers to perform particular services may want to consider filing the Form SS-8(PDF). Once a determination is made (whether by the business or by the IRS), the next step is filing the appropriate forms and paying the associated taxes. Forms and associated taxes for independent contractors 2. There are specific employment tax guidelines that must be followed for certain industries.

If you classify an employee as an independent contractor and you have no reasonable basis for doing so, you may be held liable for employment taxes for that worker (the relief provisions, discussed below, will not apply). Employment Tax Guidelines: Classifying Certain Van Operators in the Moving Industry(PDF) 2. If you have a reasonable basis for not treating a worker as an employee , you may be relieved from having to pay employment taxes for that worker. To get this relief, you must file all required federal information returns on a basis consistent with your treatment of the worker. For an employee , the employer pays PAYE tax and ACC on the employee ’s behalf, and the employee is paid net wages or salary.

A contractor generally pays their own tax directly to the IR.

In special situations the company or person the contractor is contracted to may deduct withholding tax on their behalf. For the employee , the company withholds income tax, Social Security, and Medicare from wages paid. For the independent contractor , the company does not withhold taxes.

If you hire a worker you must check if they are an employee or contractor. If you previously hired a worker without checking, review your decision now to make sure you got it right. Instant Downloa Mail Paper Copy or Hard Copy Delivery, Start and Order Now!

It is crucial for employers to understand the distinction between the two aforementioned types of workers, considering the serious penalties that. Businesses specify these categories in the IRS Form SS-8. Do you need an employee or independent contractor ? Use this accessible checklist template to find out, or to determine whether current workers are properly classified.

An employee may quit at any time while an independent contractor may be liable for failure to complete a contract. Working with multiple clients generally indicates independent contractor status. Does the worker have multiple clients?

Applying the tests Determining if an individual is an employee or contractor at law, first requires the application of the common law test. The main difference between employee and Independent contractor is the nature of the contract itself. Contractor works any way desired to provide required service or product.

It must be determined what the intention was of the parties to the contract - was the intention that it actually be a contract of employment, or was the intention that it actually be an Independent contractor relationship ? You can view this publication in:.