Can My Business Use Independent Contractors Instead of Employees?
The short answer to this question is yes, but we would be remiss to leave it at that. While a business may use independent contractors exclusively, the owner or manager must be sure they are not actually employees disguised as independent contractors. Simply calling your employees independent contractors does not make them independent contractors.
How to tell one from the other
Stay on friendly terms with the Internal Revenue Service and other government agencies tasked with ensuring compliance with employment and tax regulations by considering each of the following factors for the jobs you plan to hire out:
- Do you plan to provide the tools necessary to complete the job, such as a ladder and brushes for a painter or a computer for a bookkeeper?
- Will the job be completed in a relatively short period of time or will it need to be done consistently over a longer period of time?
- Are you hiring at a flat rate for completing a project or by the hour?
- Does the job require a relatively high level of skill and experience?
- Do you plan to supervise the person hired, or will the job be done without your direct supervision?
- Does the person hired have some flexibility in determining the best method and schedule for completing the job?
- Does the person hired work for someone else, such as a temporary placement agency?
As these questions indicate, the more direct control you have over the person hired, the more likely that person is to be considered an employee rather than an independent contractor for tax and regulatory purposes.
Another important point is that even if you and the people you hire agree at the outset that they will be independent contractors, that doesn't mean the Internal Revenue Service will agree with you if the issue comes up in an audit.
Get a legal opinion if you're still not sure
If you're not sure whether your employees and independent contractors are categorized correctly, call one of our experienced Bryan-College Station, Texas business law attorneys at Peterson Law Group. We analyze your business and employment questions and make legal recommendations you can trust. Call the Peterson Law Group to make an appointment at 979-703-7014“>979-703-7014 or fill out our online contact form.