Employee or Contractor?

This post by Bill Sims

Posted in Business Start-Up, Employees

Employees or Contractors

We tend to get quite a few aspiring business owners and entrepreneurs that come into our offices thinking that they will save some time and costs if they simply hire the people they need in their business as independent contractors.

Usually it’s a “friend” or relative that’s provided them this advice. After all, if you don’t have to mess around with payroll, withholding, reporting & paying various taxes, and providing all the other things employees need, then it must be better.  After all, you can just pay a contractor what you owe them, and let them take care of the taxes and such.

The advice I usually give them is “If it looks like a duck, walks like a duck, and quacks like a duck, it’s probably a duck,” because this test usually works for this employee/contractor determination.

If you are hiring someone to work at your direction, provide them training and tools to do the job, set their hours, pay them by the hour, week or month, and treat them like an employee, that’s probably what they are.

We have a really good publication concerning this determination, “Employee or Independent Contractor?” among the many tools on our website.

The Internal Revenue Service sets the rules on this, and provides detailed information in its Publication 15A “Employers Supplemental Tax Guide. They will also help you make the determination for your particular business if you fill out their form SS-8 and send it to them.

Before you hire anyone, as an employee or contractor, you should really talk it over with your accountant or tax advisor, they will help you figure it out, and get it right!

Quack, Quack.

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