Guide to Starting and Operating a Small Business | 2018 Guide to Starting and Operating a Small Business - Page 74

Appendix A Employee or Independent Contractor? It is extremely important for a business owner to determine the employee or independent contractor status of individuals providing services to or for the business. One cannot automatically presume or designate that an individual will be providing services as a contractor to their business rather than providing services as an employee, particularly if it is done as a means to avoid responsibilities to the employee as well as the responsibilities of pay- roll, income tax withholding, Social Security and Medicare taxes. If you classify an employee as an independent contractor and you have no reasonable basis for doing so, you may be held liable for employment taxes for that worker. Independent Contractor Defined People such as doctors, dentists, veterinarians, lawyers, accountants, contractors, subcontractors, public stenographers, or auctioneers who are in an independent trade, business, or profession in which they offer their services to the general public are generally independent contractors. However, whether these people are independent contractors or employees depends on the facts in each case. • The general rule is that an individual is an independent contractor if the payer has the right to control or direct only the result of the work and not what will be done and how it will be done. The earnings of a person who