Employers are constantly searching for ways to help reduce their tax burden while increasing profit. We often review scenarios and examples our clients throw at us. To simplify, we have listed the following checklist for anyone contemplating this idea- if you still aren’t sure after reading this, we recommend that you contact us for a little more help…
Here are some key questions that should be answered while going down this path:
- Does your independent contractor operate independently?
- Do you assign their work, assist them with their work or determine how they work?
- Do you provide a computer, business cards, work space or administrative support for them?
- Do you require them to follow your company policies?
- Do you require them to work on your work schedule?
- Do you require them to participate in company events or training?
If you answered “Yes” to some or most of these questions, keep reading…you may be in the problem zone:
- Have you issued this contractor a W-9 Form?
- Do you pay them a flat fee?
- Do they pay for their own expenses?
If you answered “No” to these questions, keep reading…you may be further in the problem zone…
- Do you have a written agreement with your contractor specifying the detail of the work involved?
- Do they have a degree or professional license needed to do the scope of the work?
If you found that you fell into the problem zone, here are some things to keep in mind and why it is important for you to look further…
If you receive an audit from the department of labor, and are found to have misclassified workers, you may be subject to the following:
- Back taxes and penalties for all hours worked
- Un-paid overtime and penalties for overtime not paid (including possible jail time)
- Potential Health Related Claims if you offer a group plan and contractors were misclassified and not offered benefits given to other employees
For further information related to independent contractors, please reference the Department of Labor Website at
http://www.dol.gov/elaws/esa/flsa/docs/contractors.asp or call us at (864) 451-7809 for further help.