Your contractor might be an employee if…

Recently while working with a client, I realized that they had perhaps been stretching the notion of independent contractor.

The repercussions for treating an employee as an independent contractor are serious. They include IRS and Department of Labor fines and/or obligations to pay back unpaid taxes.

Depending upon how long it has gone on, this could amount to thousands or tens of thousands of dollars. Maybe more.

I informed my client of my concern. They asked me, “How do I know if someone should be a contractor or an employee?”

In the video above we have outlined four major indicators. 

I explained that there are some great indicators as to whether a contractor is actually an employee, and vice a versa.

In the end we helped the business explain the change to the people involved, which by the way was a very minor wage and cost increase.  Most importantly the owner is now not at risk of a federal fine.

Below are some additional resources to help you sort through whether your employee is a contractor or your contractor might be an employee.

https://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Independent-Contractor-Defined

https://www.dol.gov/whd/regs/compliance/whdfs13.pdf

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