With the end of the calendar year fast approaching and the advent of 1099-NECs fast approaching, it’s important to have a refresher on what constitutes an Independent Contractor, as many are hired as such in the real estate and construction industry, but unfortunately there are many lines crossed that get blurred and could often lead to that person(s) be considered a potential W2 employee if the hiring person isn’t careful.
The Independent Contractor’s Business
Be aware though that if you control an independent contractor’s or leased employee’s performance on the job, you may be classified as a “joint employer” along with the leasing company, so you need to be aware of the extent of your infrastructure and how the employee works within it. Be sure not to negotiate with a leased employee regarding pay, working conditions, or performance. All payments to the employee should be paid by the leasing company, not directly from you. If you have not been contracted through a leasing company, then you must pay the contractor or their company directly.
A 20-Point Independent Contractor Do Not Perform Check List
* Profit or loss. Can the worker make a profit or suffer a loss as a result of the work, aside from the money earned from the project?
* Investment. Does the worker have an investment in the equipment and facilities used to do the work?
* Works for more than one firm. Does the person work for more than one company at a time?
* Services offered to the general public. Does the worker offer services to the general public?
* Instructions. Do you have the right to give the worker instructions about when, where, and how to work?
* Training. Do you train the worker to do the job in a particular way?
* Integration. Are the worker’s services so important to your business that they have become a necessary part of the business?
* Services rendered personally. Must the worker provide the services personally, as opposed to delegating tasks to someone else?
* Hiring assistants. Do you hire, supervise, and pay the worker’s assistants?
* Continuing relationship. Is there an ongoing relationship between the worker and yourself?
* Work hours. Do you set the worker’s hours?
* Full-time work. Must the worker spend all of his or her time on your job?
* Work done on premises. Must the individual work on your premises, or do you control the route or location where the work must be performed?
* Sequence. Do you have the right to determine the order in which services are performed?
* Reports. Must the worker give you reports accounting for his or her actions?
* Pay Schedules. Do you pay the worker by hour, week, or month?
* Expenses. Do you pay the worker’s business or travel costs?
* Tools and materials. Do you provide the worker with equipment, tools, or materials?
* Right to fire. Can you fire the worker?
* Worker’s right to quit. Can the worker quit at any time, without incurring liability?
If you need assistance to determine if you’re classifying your independent contractors properly or need to discuss other potential tax issues, feel free to contact a tax resolution associate with Bookkeeping-Results, LLC.
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