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Independent Contractor or Employee


Independent Contractor or Employee?
Differences you need to know!



Your business is growing, you're happy you have the capital to hire more help. Stop. How do you correctly determine whether the individuals you'll be interviewing will be providing services as employees or independent contractors? It's critical as a business owner that you correctly identify a workers status prior to a verbal or written agreement between both parties. Understanding the factors in order to comply with IRS rules can be a complicated undertaking. To avoid confusion, fines or problems you need to familiarize yourself with the following information before you hire a worker. There is no single test but the following guidelines should be clearly understood.


To begin, employers aren't required to pay payroll taxes, Medicare, Social Security, or unemployment insurance when they use independent contractors instead of employees. Independent contractors also aren't entitled to the protections outlined in the Fair Labor Standards Act; such as minimum wage laws, overtime, vacation pay, and other benefits. But if you claim certain workers as independent contractors and the work they perform for you falls under the guidelines of employees, there can be expensive consequences.

How to Make a Determination

The IRS has three aspects to consider whether you or the worker has the right to control each one.

Behavioral control: If you direct and control how your workers accomplish their jobs, they are probably employees. Independent contractors, on the other hand, take on jobs and get them done using their own methods.


Financial control: An employee earns a regular wage, while an independent contractor is paid a flat fee per job, for time and materials, or, in some cases, by the hour. In addition, independent contractors are free to advertise their services to other businesses, while employees typically only work for one company.


Type of relationship. You should only provide insurance, pension plans, and vacation and sick pay to employees. And if you expect that the relationship will last indefinitely, rather than for just a project or set period, you likely have an employee. If workers provide services that are a key part of the life of your business, you probably direct and control those activities, which would make them employees.

When an employee classification is a concern for your company, don't take chances, contact The ZinkCPA tax team. We're here to help you determine your workers' status and assist with other related tax solutions.


We look forward to helping you. For more information call us today at (239) 936-1120 or email us at accounting@zinkcpa.com


Gordon Zink CPA, PA is a proud member of the Florida Institute of Certified Public Accounts