Are you paying for an employee or an independent contractor?

The difference between an employee and independent contractor at times may seem an insignificant consideration. If you've always paid your worker as an independent contractor, maybe you should reconsider this practice.

No single factor determines whether your worker is an employee or independent contractor. All factors must be considered to make this determination. The following chart may help you make this determination. If you require assistance, please do not hesitate to contact us.

The existence of your right to control or direct how the work is done may be shown if you:

1. Give instructions on how, when or where to do the work,
2. Give instructions on what tools or equipment to use,
3. Give instructions on what assistants to hire to help with the work,
4. Give instructions on where to purchase supplies or services,
5. Provide training on required procedures or methods.

You should proceed with caution if you are considering classifying a worker as an independent contractor. If the IRS determines that you inappropriately classified an employee as an "independent contractor" then you could be held responsible for back payroll taxes (including social security and medicare taxes and income taxes that should have been withheld).

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Copyright © 2000 Coston and McIsaac, CPAs
Last modified: January 06, 2005

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Bar Harbor, ME 04609
Telephone: 1-207-288-9458
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