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How can you cut operating expenses down to size? Using more independent contractors might be the answer. But you can’t simply label workers as “independent contractors” when it suits your needs.

If the IRS reclassifies workers as employees, your company could be hit with a whopping bill for back employment taxes … with penalties and interest to boot.

Strategy: Stick to your guns for legit arrangements. In a pinch, you might rely on “Section 530 relief” to bail you out.

This special rule, written into law in Section 530 of the 1978 Revenue Act, allows you to claim independent contractor status for workers if you meet certain requirements (see related article).

The 20-questions test

Typically, the IRS uses a 20-factors test to determine if a particular worker is an independent contractor or an employee. The more control that your company exerts over a person—for example, setting work schedules, preventing the w...(register to read more)

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