To remove your email from the subscriber's list, please follow the instructions on the email.

The Tax Prophet Newsletter   Issue #101 September, 2011


In This Issue:
Key Tests

Independent Contractor vs. Employee -- The Basics

Part 1 of 3


The classification of workers as independent contractors is fraught with potential disaster. A misclassification could ruin the company financially and, potentially, its officers and owners.

The rules are complex and sometimes contradictory. In addition to the IRS and state taxing authorities, state labor agencies may examine the company's practices.

Key Tests

Traditionally, the key test on whether a worker is truly an independent contractor or is merely an employee who has been misclassified as such, involves the issue of control: Are the services of the worker subject to the taxpayer's (company's) will and control over what must be done and how it must be accomplished?

However, another equally important consideration is whether the company contracted with an independent business owned by the worker, rather than the worker directly. This is becoming a much more important factor than in the past.


Remember the "duck" theory: If it walks like a duck, swims like a duck, looks like a duck and quacks like a duck, it is a duck, no matter what you call it.

Do not treat someone who is obviously an employee as an independent contractor. Treating receptionists, secretaries, office managers, cooks, wait staff and office personnel as independent contractors will never fly.

Also, do not treat temporary or new hires as independent contractors during a trial period. The focus is on the tests described above, not the number of hours worked or the duration of employment.

Do not try to force a worker into independent contractor status, because if the worker quits and files for unemployment, expect a big-time legal problems from the state paying the unemployment benefits.

Home | Who We Are | What's New | Search | Contact Us | Subscribe

All contents copyright 2011 Robert L. Sommers, attorney-at-law. All rights reserved. This newsletter provides information of a general nature for educational purposes only and is not intended to be legal or tax advice. This information has not been updated to reflect subsequent changes in the law, if any. Your particular facts and circumstances, and changes in the law, must be considered when applying U.S. tax law. You should always consult with a competent tax professional licensed in your state with respect to your particular situation. The Tax Prophet is a registered trademark of Robert L. Sommers.