W-2s vs. 1099s - Who Should be an Independent Contractor

Nevertheless, using independent contractors certainly has its place and is not an altogether bad idea, an idea that can offer many advantages to both employers and small businesses. However, the business relationship that exists between a company and the person performing the services must be a legitimate one.

According to the IRS, whether these people are independent contractors or employees depends on the facts in each case. To quote the IRS, "It is critical that business owners correctly determine whether the individuals providing services are employees or independent contractors."

"Correctly" is the problematic word. Even employers who thought they had considered carefully find to their dismay they only considered one side of the situation and forgot other considerations. Alternatively, the employer dazzled by dollar signs, defined key terms advantageously for themselves according to their own personal definition, rather than how a regulatory agency used or defined them.

There are also additional agencies, factors and tests that need to be considered and reviewed before setting up that independent contractor relationship. Many employers believe if there is a contract that the determination is made. While having a contract helps, it is not the final determinant. Because if it looks like a duck, quacks like a duck and walks like a duck, having a contract that states otherwise may be of little help.

Many employers think only of one thing when deciding to use independent contractors. Costs. Cutting costs. Two main costs - payroll and overhead. No, overtime either. If they hurt themselves at work, it's their own dime. After all some employees are even begging to be an independent contractor. What could go wrong? Lots.

As Mom said, it's all fun and games until someone gets hurt. In these situations that will usually be the employer. Back taxes with hefty penalties, workers comp claims, even problems with benefits that should have been provided. What started as a good idea becomes a nightmare of added costs including the added costs of tax attorneys and CPAs that the employer will pay to dig them out of the hole they dug for themselves.

How Independent Contractors Can Cause Compliance Challenges

• HR
• Payroll
• Finance and Business Owners

Target Companies:

• Small to Midsize Companies
• Retail
• Financial Services
• Tech
• Consulting
• Training and Construction Companies.

How Independent Contractors Can Cause Other Compliance Challenges

• It's All Fun And Games Until Someone Gets Hurt - Problems You Probably Haven't Even Considered
• What The IRS Scrutinizes In Independent Contractor Arrangements
• It's About Control. Defining Control
• Employees Have Options Too.
• The Department of Labor's View
• Don't Forget The States
• How The EEOC Could Get Involved.
• Independent Contractors Dos and Don’ts
• Common, And Very Serious Mistakes
• Temporary Employees. Whose Employee Are They?
• What About The Employee Who "Wants" To Be An Independent Contractor?
• Balancing HR Challenges With Business Considerations

HR, payroll, finance and business owners