The RSA also requires employers to keep employment records. However, your income as an employee may be subject to FICA (Social Security Tax and Medicare) and income tax withholding. « If you still can`t tell if a worker is an employee or an independent contractor, » says Talibah Bayles, founder and CEO of TMB Tax and Financial Services, « the IRS has a form that business owners can use to let the IRS understand. This is Form SS-8, Determination of Worker Status for Federal Labour Tax and Income Tax Purposes. Are you hiring someone to carry out the small project you`ve had to do for ages? If they work as an independent contractor rather than an employee, be sure to protect your business with an independent contractor contract. An independent contractor within the meaning of Law.com is a natural person or company that provides services to another natural or legal person with a contractual agreement between the parties. With all the conditions – such as tasks, payment, quantity, and type of work – contracts govern what work is more than how the work is done. An independent contractor is different from an employee who regularly works for a single employer. 17.
If I want to work as an independent contractor, what do I need to do to prevent the company paying me from getting into legal trouble? « Most people think that the only difference between an independent contractor and an employee is how they are paid. In particular, independent contractor compensation is not subject to withholding taxes, such as: federal income taxes and FCIA taxes, » said attorney Michael C. Harman. « In addition to compensation, independent contractors have more autonomy in the work they do. » There`s more than one test for determining whether an independent contractor is actually an employee, and doing it wrong can cost you more than retroactive payments – it can cost you your freedom. Out-of-pocket expenses: Independent contractors are more likely to have out-of-pocket expenses than employees. Of particular importance are the fixed operating costs, which are incurred, regardless of whether work is in progress or not. However, employees may also incur unreimbursed expenses related to the services they provide to their business. If you have a reasonable basis not to treat an employee as an employee, you may be exempt from paying payroll taxes on that worker. To receive this relief, you must submit all required federal information on a basis consistent with your salary as an employee. You (or your predecessor) must not have treated an employee who held a substantially similar position during periods beginning after 1977.
See 1976, Section 530 Employment Tax Relief Requirements (PDF) for more information. To convey this message in a simple way, this diagram from ComplyRight shows the striking differences between the classifications of independent contractor and employees. It is important for business owners to properly determine whether the individuals providing services are employees or independent contractors. The sustainability of the employee`s relationship with the employer. More lasting relationships create an employee-employer relationship. Temporary services are more likely to establish a contractual relationship. Training: The employer can organize courses, meetings or closely supervise employees in the workplace. Independent contractors can do the job as they please. Classifying workers as employees or independent contractors is a tricky business. After all, the rules change as often as the administrations in Washington, D.C.
To avoid this error, the IRS has developed the IRS 20 factor test – Independent contractor or employee? This 20-point test allows you to examine your needs and why you want an independent contractor to determine whether you should hire an independent contractor or an employee. This test is widely used to determine when and how the IRS tracks employers in the United States to misclassify workers. *Please note that this copyright section only applies to works created by independent contractors. If you are an employee, the rights to all works you have created in the course of your employment relationship automatically belong to your employer. The law in this area is evolving very rapidly with the increase in on-demand employment and application-based services. If you work for one of these companies and are wondering if you are being paid correctly, please contact a lawyer in your area to determine the current state of the law that applies to you. For more information on how to determine if you are an independent contractor or an employee, see the section on independent contractors or employees. As an independent contractor, the terms and conditions of the work you perform are set out in a contract between you and the employer. Even if you are not considered an « employee » under federal labour law, you can still join a union. However, you should keep in mind that an independent contractor unit is not subject to the same privileges and protections as a regular union bargaining unit.
For example, an employer does not have the same obligation to negotiate an independent contractor`s contract terms with a union as it does to negotiate matters affecting its regular employees. In addition, an independent contractor who went on strike would not be protected from employer retaliation under the National Labour Relations Act. Hiring independent contractors is popular because it reduces the number of employees and thus reduces overall costs. Here`s what your independent contractor application should include. To file a complaint about unpaid wages under the FLSA, you can either contact the DOL`s payroll department, which can file a complaint on your behalf, or take your own legal action (which may require you to hire a lawyer). 3. Can employers simply decide that I am an independent contractor so they don`t have to pay my taxes, salary and benefits? Your state`s law may have different methods of recovering unpaid wages and different remedies for those who manage to prove a violation.