Whether a worker is an independent contractor, or an employee depends on the relationship between the worker and the business. Generally, there are three categories to consider.<\/p>\n\n\n\n
\u2022 Behavioral control<\/strong> \u2212 Does the company control or have the right to control what the worker does and how the worker does the job? Misclassified worker <\/strong> Voluntary Classification Settlement Program<\/strong> Who is self-employed?<\/strong> \u2022 They carry on a trade or business as a sole proprietor <\/a>or an independent contractor<\/a>. Self-employed individuals, including those who earn money from gig economy<\/a> work, are generally required to file an tax return and make estimated quarterly tax payments<\/a>. They also generally must pay self-employment tax which is Social Security and Medicare tax as well as income tax. These taxpayers qualify for the home office deduction<\/a> if they use part of a home for business.<\/p>\n\n\n\n Courtesy of the IRS<\/p>\n","protected":false},"excerpt":{"rendered":" It is critical for business owners to correctly determine whether the individuals providing services are employees or independent contractors. An employee is generally considered anyone who performs services, if the business can control what will be done and how it … Continue reading
\u2022 Financial control<\/strong> \u2212 Does the business direct or control the financial and business aspects of the worker’s job. Are the business aspects of the worker\u2019s job controlled by the payer? Things like how the worker is paid, are expenses reimbursed, who provides tools\/supplies, etc.
\u2022 Relationship of the parties<\/strong> \u2212 Are there written contracts or employee type benefits such as pension plan, insurance, vacation pay? Will the relationship continue and is the work performed a key aspect of the business?<\/p>\n\n\n\n
Misclassifying workers as independent contractors adversely affects employees because the employer\u2019s share of taxes is not paid, and the employee\u2019s share is not withheld. If a business misclassified an employee without a reasonable basis, the business can be held liable for employment taxes for that worker. Generally, an employer must withhold and pay income taxes, Social Security and Medicare taxes, as well as unemployment taxes. Workers who believe they have been improperly classified as independent contractors can use Form 8919<\/a>, Uncollected Social Security and Medicare Tax on Wages<\/em> to figure and report their share of uncollected Social Security and Medicare taxes due on their compensation.<\/p>\n\n\n\n
The Voluntary Classification Settlement Program<\/a> is an optional program that provides taxpayers with an opportunity to reclassify their workers as employees for future employment tax purposes. This program offers partial relief from federal employment taxes for eligible taxpayers who agree to prospectively treat their workers as employees. Taxpayers must meet certain eligibility requirements and apply by filing Form 8952<\/a>, Application for Voluntary Classification Settlement Program<\/em>, and enter into a closing agreement with the IRS.<\/p>\n\n\n\n
Generally, someone is self-employed if any of the following apply to them.<\/p>\n\n\n\n
\u2022 They are a member of a partnership<\/a> that carries on a trade or business<\/a>.
\u2022 They are otherwise in business for themselves, including a part-time business<\/a>.<\/p>\n\n\n\n![\"\"](\"http:\/\/hoorfarlaw.com\/blog\/wp-content\/uploads\/2012\/12\/irs1.gif\")
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