What is an independent contractor for IRS classification purposes? How do you know if you have it right? Knowing if your independent contractors are classified correctly isn’t always easy. Not all situations are clear-cut and even the most well-meaning employers can make mistakes. Justifications that seem reasonable to you may be seen as unlawful to enforcement agencies, and one error can have dire and costly consequences. In a BLR webinar titled "Independent Contractor or Employee? Avoid the Misclassification Crackdown," Kara Shea answered these questions.
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In the webinar, Shea noted that independent contractors are "individuals who contract to provide services to your business." It does not include situations where an entire department is outsourced to another firm; this is another issue altogether.
If these people are correctly classified, they do not have the legal status of employees. Shea continued: "not everybody that works for you or provides a service for you is necessarily your employee. They can provide a service for you (for compensation) and be an independent contractor."
When determining whether someone is an independent contractor or employee, it is important to remember that independent contractors may be known by other names as well, such as freelancers, consultants, or just contractors. It’s also important to note that you may be hiring someone or a group of people who are part of a business, and they could still be classed as independent contractors.
In a related article, Shea discusses the benefits of hiring an independent contractor.
For more information on classifying workers as independent contractors or employees, order the webinar recording. To register for a future webinar, visit http://catalog.blr.com/audio.
Attorney Kara E. Shea, a member at Miller & Martin PLLC, provides advice on issues and compliance to national, regional, and local employers of all sizes, ranging from Fortune 500 companies to small businesses in a variety of industries. She also represents employers on a variety of employment issues such as wage and hour cases, including class actions.