Employee VS Independent Contractor?

An important question businesses must answer when hiring is whether to consider the worker an employee or an independent contractor. This is an important distinction since the answer determines who is responsible for paying the employer payroll taxes. An independent contractor must pay both the employee and the employer payroll taxes in the form of self-employment taxes. An employee has the empl

An important question businesses must answer when hiring is whether to consider the worker an employee or an independent contractor. This is an important distinction since the answer determines who is responsible for paying the employer payroll taxes. An independent contractor must pay both the employee and the employer payroll taxes in the form of self-employment taxes. An employee has the employee portion of the payroll taxes withheld from their pay. The employer then pays both the employee and employer payroll taxes to the taxing agencies.

The difference between an employee and an independent contractor is defined by how much control the employer has over how the work is done. For example, an independent contractor often works for multiple employers, defines their own work schedule, pays work-related expenses, and works on a project basis rather than a permanent basis.

When considering a new hire, an employer should decide how much control they need over the position. If you need help on a temporary basis related to a specific project, the position could be classified as an independent contractor if the worker provides their own equipment and controls most aspects of how the job is done. However, if you are looking for ongoing help with tasks that are an integral part of your business’ operations, an employee will better fit your needs. In the latter case, the worker will, most likely, be considered an employee by the IRS regardless of whether the employer pays payroll taxes.

The difference between an employee and an independent contractor is less clear in the case of certain specialist positions such as consultants, doctors, veterinarians, and construction contractors. Since positions such as these require specialized skills and licenses, workers can often practice their trade independently. However, businesses also often hire these workers on a permanent basis, so there can be some confusion.

The IRS considers 20 factors in determining whether an individual is an employee or an independent contractor. These factors include whether the employer is training or instructing the worker, how integrated the worker is into the business’ operations, and the permanence of the relationship between employer and worker. The worker is likely to be considered an employee if the position requires full-time work, the employee works on the employer’s premises, and the services of the worker are not available to the wider public. An independent contractor, on the other hand, sets their own work hours, provides their own tools and materials, pays for their business-related expenses, and may maintain their own office.

Correctly determining whether a new hire is an independent contractor or an employee will prevent penalties from the taxing agencies by ensuring the correct party is paying the payroll taxes.

oyee portion of the payroll taxes withheld from their pay. The employer then pays both the employee and employer payroll taxes to the taxing agencies.

The difference between an employee and an independent contractor is defined by how much control the employer has over how the work is done. For example, an independent contractor often works for multiple employers, defines their own work schedule, pays work-related expenses, and works on a project basis rather than a permanent basis.

When considering a new hire, an employer should decide how much control they need over the position. If you need help on a temporary basis related to a specific project, the position could be classified as an independent contractor if the worker provides their own equipment and controls most aspects of how the job is done. However, if you are looking for ongoing help with tasks that are an integral part of your business’ operations, an employee will better fit your needs. In the latter case, the worker will, most likely, be considered an employee by the IRS regardless of whether the employer pays payroll taxes.

The difference between an employee and an independent contractor is less clear in the case of certain specialist positions such as consultants, doctors, veterinarians, and construction contractors. Since positions such as these require specialized skills and licenses, workers can often practice their trade independently. However, businesses also often hire these workers on a permanent basis, so there can be some confusion.

The IRS considers 20 factors in determining whether an individual is an employee or an independent contractor. These factors include whether the employer is training or instructing the worker, how integrated the worker is into the business’ operations, and the permanence of the relationship between employer and worker. The worker is likely to be considered an employee if the position requires full-time work, the employee works on the employer’s premises, and the services of the worker are not available to the wider public. An independent contractor, on the other hand, sets their own work hours, provides their own tools and materials, pays for their business-related expenses, and may maintain their own office.

Correctly determining whether a new hire is an independent contractor or an employee will prevent penalties from the taxing agencies by ensuring the correct party is paying the payroll taxes.