“Can we classify this person as a 1099?” is a common question for a payroll company. Sometimes one assumes a worker can be considered a contractor if they are only temporary, or only work a few hours a week, but that’s not necessarily the case. Take time to evaluate your employee classifications before it becomes a costly mistake.
To determine whether an individual is an employee or contractor, the IRS asks us to examine the relationship of the worker to the business.
- Do you, as the employer, control how the employee completes the task?
- Do you direct their daily schedule and where they perform the work?
- Do you provide the materials/equipment with which to complete their work?
- Does the employee receive training by your business in order to complete their assignment?
- Is the employee hired with the expectation that the relationship will continue indefinitely?
If you said “yes” to any of the above questions, more than likely, the worker is an employee and not an Independent Contractor. What does this mean for you? An employer generally must withhold federal income taxes, withhold and pay social security and Medicare taxes, and pay unemployment tax on an employee’s wages.
For more information, or if you have questions, read more at: http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Independent-Contractor-(Self-Employed)-or-Employee%3F or give us a call.