What You Need to Know About Independent Contractors to Protect Your Business

man at a desk working on a laptopFrom QuickBooks, Susan Solovic describes how to determine if a workers is an employee or independent contractor and shares advice on how to protect your business from allegations of misclassification.  Susan writes:

How to Determine If Your Worker Is a Contractor

Various state and federal agencies and taxing authorities have a variety of tests to determine whether a worker is properly classified as an independent contractor or not. The most commonly recognized assessment is the IRS’s 20-factor test, most of which is listed below. I’ve only included some of the highlights so you can get an idea about the criteria these agencies consider when making a determination.

To be classified as an independent contractor, the individual must:

  1. Have the ability to set his/her own hours and do the job in his/her own way.
  2. Have the ability to use his/her own methods as opposed to being required to undergo training from the purchaser of his/her services.
  3. Accept a risk. In other words, he/she can earn a profit or suffer a loss from the activity.
  4. Be able to assign others to do the job and is not required to do it personally.
  5. Be hired for one job and not have a continuing relationship with the company.
  6. Have more than one client at a time.
  7. Must pay his/her own business and traveling expenses. NOTE: The employer may later reimburse him/her for those expenses.
  8. Not work on the employer’s premises and use his/her own office, desk and equipment.
  9. Be paid on a commission basis or on a per-project basis rather than by the hour, week or month.
  10. Must agree to complete a specific job and be responsible for the satisfactory completion, or he/she is obligated to make good for any failure.

Read the full story at What You Need to Know About Independent Contractors to Protect Your Business

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