On the other hand, the status of independent contractor is attractive, because you don`t have to worry about labor tax and you don`t have to offer expensive ancillary benefits such as health insurance, retirement provision and paid holidays. If you pay US$600 or more to an independent contractor during the year, you must issue a Form 1099-MISC to report what you paid. This is usually the extent of your bureaucratic responsibility. The federal government and courts apply an „economic reality test“ when deciding whether workers should be considered independent contractors or employees for federal labor tax purposes and compliance with labor laws: companies now have an additional incentive to classify new employees as independent contractors: it reduces their number of employees in order to comply with the CBA. This reduces their health insurance costs and reporting obligations. Anyone who creates a UK business partnership will know this, here`s the catch: if you wrongly treat a worker who is actually an employee as an independent contractor, your company could receive taxes on unpaid wages, plus interest and penalties. They could also be held liable for worker benefits that should have been made available but were not in place, including significant penalties under federal law. You can also submit IRS Form SS-8 „Determination of Workers` Status for Federal Labor Tax and Income Tax Deduction Purposes.“ The IRS will then dictate how to classify a worker. Note, however, that in the past, the IRS reflexively classified workers as employees and not as independent contractors. A written contract can help support a worker`s status as an independent contractor and minimize ambiguities. The contract should: In addition, there is a historical precedent for the classification of this type of workers as an independent contractor: it will certainly help your independent contractor if the work outside your premises is performed with equipment belonging to the worker.
But these facts are not a panacea, especially if you treat another worker in the same circumstances as an employee. Dol and IRS apply an „Economic Realities Test“ to determine the classification of workers (see „Factors for Deciding on the Classification of Workers“ on the right). But determination traditionally comes down to: a worker is an independent contractor if you have little or no control over how that person does the work. If you offer significant daily monitoring, the worker is likely an employee. A worker who wishes to establish status as an employee or independent contractor may also submit Form SS-8. Angry former workers particularly often file the form to prove that a company has denied workers benefits by calling it a self-employed subcontractor. . . .