Independent Contractor or Employee: How Government Agencies Make the Call
Make sure the independent contractor you hire doesn't get reclassified as an employee.
A number of laws govern whether a worker is an independent contractor (IC) or an employee, and each of these laws has a different way of looking at the issue. For example, the IRS has one method of determining whether a person is an independent contractor, but your state workers' compensation board may use a different test.
Because of all these different laws (often referred to as "worker classification" rules), the issue of whether a worker is an IC is not one question, but many. Employers who don't take the time to learn the rules before they hire an independent contractor can get hopelessly confused -- and this confusion can lead to trouble with one agency or another. If you want to avoid problems such as fines and taxes, know the rules before you hire a worker.
 Blaze a Paper Trail |
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Have all potential workers fill out a questionnaire regarding their independent contractor status before you hire them, and collect documents from them proving they are indeed independent contractors (for example, advertisements, invoices from other companies, professional licenses, and tax returns). For more information, read Require Documentation When You Hire Independent Contractors.
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