Here is an interesting article comparing the question of Employee Vs Independent Contractor:
The U.S. Internal Revenue Service has pretty clear rules (click HERE) on when someone must be classified as an employee rather than an independent contractor. Here are some of the indicators used:
· Does the person work on company premises? If so, it is much harder to classify them as an independent contractor.
· Is the person paid by their time, such as an hourly wage or weekly salary? Independent contractors are typically paid by their output, not their time.
· Is the person in control of their own schedule for completing work? If the schedule is dictated by the hiring business, the person is more likely to be classified an employee.
· Is the person using their own tools? If the tools the job requires are provided by the hiring business, the contractor is more likely to be classified an employee.
It is critical that business owners correctly determine whether the individuals providing services are employees or independent contractors.
Generally, you must withhold income taxes, withhold and pay Social Security and Medicare taxes, and pay unemployment tax on wages paid to an employee. You do not generally have to withhold or pay any taxes on payments to independent contractors.
Determining Whether the Individuals Providing Services are Employees or Independent Contractors
Before you can determine how to treat payments you make for services, you must first know the business relationship that exists between you and the person performing the services. The person performing the services may be –
- An independent contractor
- An employee (common-law employee)
- A statutory employee
- A statutory nonemployee
- A government worker
In determining whether the person providing service is an employee or an independent contractor, all information that provides evidence of the degree of control and independence must be considered.
If you need help with your employee management, contact My Junna at myjunna.com/contact.