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Independent Contractor Status

The IRS has criteria for determining whether or not someone is an employee or an independent contractor. We list these 20 items for your review. While a worker may not meet each and every criterion, clearly the more items on this list that the worker meets, a higher the probability worker will be deemed an employee versus an independent contractor. Simply giving a worker a 1099 form will not automatically turn that worker into an independent contractor versus an employee of the firm. Many small business owners try to avert the employer taxes that goes along with having employees as well as they try to avert paying higher insurance premiums as many policies are based upon payrolls in the promulgation of their rates and premiums. All of this appears to work until somebody gets injured or sued on the job as a worker. Most workers do not carry their own medical insurance or their own general liability insurance or their own workers comp insurance. When the accident happens to the worker that will be in all of this will unravel and the business owner can find themselves facing fines and penalties and probably not having any insurance coverage to pay the claims at hand. The top 20 characteristics of an employee looks like are:

1. Number one. The worker must comply with the instructions from the employer on how to do the work.
2. The worker receives training and direction from the employer and/or supervisors.
3. The workers service is an integral part or is integrated into the employers business.
4. The worker provides service that the worker must personally perform or discharge.
5. The worker is helped by other people throughout the organization that is hired and supervised and paid by the employer.
6. The worker as an ongoing and continual relationship through work with the employer.
7. The employer set the hours during which the work must be done and/or completed.
8. The worker work works full-time for the employer.
9. The worker does this work at the employer’s premises.
10. The worker must always work in the order set by the employer.
11. The worker must report regularly to the employer.
12. The worker gets paid regular mounts at regular intervals by the employer.
13. The worker gets paid for business and related travel expenses.
14. The worker relies on the employer for his tools and materials and supplies.
15. The worker lacks a major capital investment in facilities, equipment, inventory and supplies they uses at his work.
16. The worker cannot make a profit or suffer loss from his work.
17. The worker works for one employer at a time.
18. The worker does not offer his services to the general public.
19. The worker may be dismissed by the employer.
20. Working may quit work without incurring contractual liability.

Again, most employers are under the wrong assumption that by just paying workers via a 1099 IRS form that they have dodged a bullet. As an employer if you answered yes to all 20 of these items and you are giving the worker a 1099 IRS form, you are going to have a hard time in court proving that this worker is not an employee.

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