Avoid Misclassification: Understand Independent Contractor

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The best way to avoid misclassifying workers is to understand the defining characteristics of independent contractors — and then treat them as such. Use this infographic to help you identify independent contractors and understand how they are different than employees.

Independent Contractors Checklist

Use this list to help determine if you or the person who does work for your business should be considered an independent contractor. An independent contractor:

  • Pays self-employment taxes (Social Security and Medicare).
  • Is trained in their profession.
  • Can work with many employers at one time (different clients).
  • Controls when, how and where the work is done.
  • Negotiates rates on a per-job basis.
  • Uses own tools and equipment to perform the work.
  • Does not receive employee benefits.
  • Works on a profit/loss basis.
  • Does not receive overtime pay.

Defining an Independent Contractor

The IRS says an individual is an independent contractor if the payer (employer) has the right to control or direct only the result of the work, not what will be done and how it will be done. Unlike independent contractors, employees are protected by various employment laws, including:

  • Fair Labor Standards Act (FLSA)
  • Family and Medical Leave Act (FMLA)
  • Occupational Safety and Health Act (OSHA)
  • Americans with Disabilities Act (ADA)
  • Unemployment compensation
  • Workers compensation
  • 130+ million U.S. workers are protected by the FLSA.
  • 57.3 million people freelanced in 2017.
  • 1 in 5 jobs is a contracting job in the U.S.

130+ million U.S. workers are protected by the FLSA.

57.3 million people freelanced in 2017.

1 in 5 jobs is a contracting job in the U.S.

As always, should you have any questions or concerns regarding your tax situation please feel free to call.


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Disclaimer

The information in this article is written as accurately as possible and to best of the writer's knowledge. However, there may be omissions, errors, or mistakes. Because of this and changes in circumstances, the information in this article is subject to change. This article is for informational purposes only and should not serve as professional, financial, medical, emotional, and/or legal advice. Readers may rely on the information on this article at their own risk, but they should consult a CPA, financial expert, or other professional for advice. Givilancz & Martinez, PLLC reserves the right to change and handle this article series, and therefore, may remove or alter any part of this article or the comments section. Any comments inserted by readers are not the responsibility of G&M PLLC and do not represent the thoughts or ideas of G&M PLLC.