From abcFinancial, Melissa Knowles discusses the challenges of properly classifying workers as employees or independent contractors and concludes with the duck test. If it walks like a duck and quacks like a duck it’s a duck. Before getting to this conclusion, she writes:
Generally, you must withhold income taxes, withhold and pay Social Security and Medicare taxes, and pay unemployment tax on wages paid to an employee. The IRS frowns heavily upon 1099ing someone to get around these taxes. Well, they do more than frown. They fine. Heavily. This is serious stuff. Along with penalties, an employer would be held liable for all the employment taxes of the misclassified employee. Suits have totaled in the hundreds of thousands to millions for businesses in violation (Orange County Register, FedEx, etc.).
The IRS says, “Businesses must weigh all factors when determining whether a worker is an employee or independent contractor. 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 contract, and no one factor stands alone in making this determinations. Also, factors which are relevant in one situation may not be relevant in another.” Clear as mud, right?
The simple answer. A duck.
After going through a full review of what the person does and how they do it, you still may be left scratching your head. Here’s a simple way to approach the issue: If it walks like a duck and quacks like a duck, it’s a duck. Or in this instance, if the position requires the person to be directed as to how, when, where and with what to do the job, you have yourself an employee.
Read the full story at Is Your Independent Contractor Truly Independent?