 | Sara Wright, now president of Triple Check Business Services, Inc. She heads up a team of accountants with over 75 years of combined experience. The business was started by her grandmother Wanda Hiebert. Sara began working for Wanda right out of high school 13 years ago. Being a tremendous mentor and employer, Wanda was able to teach Sara the basics of business and groom her to eventually take over the business when she retired. Through the years, Sara successfully built up the business client accounting base to more than 100 write up clients and in the process winning several sales and marketing awards. Sara now manages the Wichita location and several business accounts while Wanda remains at the Halstead location. Triple Check has 6 full time employees and provides monthly and quarterly accounting services to businesses, payroll, employee leasing services, business and tax consulting and tax preparation for both individuals and businesses. For questions or to schedule a free no-obligation consultation, Sara can be reached at 316-941-9144. |
Taxes & Accounting
2008-03-01 09:38:00
Independent contractor or employee?
Question: How do I know if an employee qualifies as an independent contractor or is he an actually an employee?
Answer: One of the hottest tax issues in recent years has been whether certain workers qualify as independent contractors or employees. Because of the abuses by some business owners, the IRS very carefully scrutinizes independent contractor claims.
There are three common misconceptions about independent contractors: (1) MYTH: They are part time or temporary. FACT: Part time or temporary workers can still be employees. (2) MYTH: They earn less than $600 in a calender year. FACT: It doesn’t matter how much money an individual makes, they can still be an employee. (3) MYTH: They make quarterly estimated payments to the IRS. FACT: Even employees can make quarterly estimated payments to the IRS. To determine if you can hire a person as an independent contractor and not withhold employee payroll taxes, answer the following questions. If the answer to the first, and most important, question is “NO,” the worker is definitely an employee and you won’t need to answer the remaining questions.
(1) Employer controls only the final result and not how the work is accomplished.
(2) Worker doesn’t receive extensive training from employer.
(3) Works as professional or skilled technician.
(4) Worker sets own time schedule or assignment is not performed at employer’s site.
(5) Provides own tools, equipment and/or supplies. Has other customers/clients.
(6) Has business card/stationery and paid advertising.
(7) Employer doesn’t have other employees doing similar work.
(8) Has written contract for a specific job or set time frame.
(9) Sends a bill for services performed.
Total number of “YES” answers. If your “YES” score was between: 7-10, The worker will probably qualify as an independent contractor. 4-6, The worker may qualify as an independent contractor. 0-3, Practice writing zeros - you’ll need lots of practice to pay the penalties and back taxes when you’re audited. The check to the IRS, for back taxes, penalties and interest for incorrectly classifying an employee as an independent contractor, can be more than 50% of the total wages paid to the worker. Change the status of the independent contractor to employee and save yourself worry (and ultimately money). This test is only a guideline and doesn’t guarantee IRS agreement. Only by completing the 4 page SS-8 Form and receiving an official IRS ruling can you be sure your person qualifies as an Independent Contractor.
