The IRS issued a fact sheet this summer to remind employers to correctly classify workers as either independent contractors or employees. (IRS FS-2006-21) The main factor in making that decision: control.
The more control you have over the "when, where and how" of workers' job performances, the more likely the worker would be classified as a common-law employee for whom you must withhold and pay federal taxes. Misclassification can lead to big-time back taxes and penalties.
- Expect new rules on who's exempt; possible changes to comp-time law
- Outsourcing payroll duties? Keep close tabs on taxes
- No unemployment if worker never returns from sick leave
- Independent contractor alert: Feds on the lookout for misclassification
- Staffing firm CEO accused of skimming $182 million in taxes