It’s all too common for businesses to mistakenly believe that they can hire someone to act as an . While avoiding having to deal with payroll taxes, liability, and employee benefits by treating the employee as an independent contractor. It can be confusing to figure out if you have hired an independent contractor or an employee. Quite regularly, I hear people refer to their employees as “1099 employees.” For the record, you cannot give 1099s to employees. I repeat:
You cannot give 1099s to employees.
Treat the employee as an employee
In particular, if you have hired somebody to work as an employee, you must treat them as an employee. That means that you must deduct taxes from their paychecks, possibly provide benefits, and have worker’s compensation insurance, amongst other things.For instance a business can be subject to hefty fines and penalties when it misclassifies an employee as an independent contractor and the IRS audits that business and finds out. In addition, businesses can also be at risk for liability to others for the actions of their employees. The legal doctrine respondeat superior makes employers liable for the actions of their employees. Now that you’ve gotten your Latin lesson in for the day, read on to learn what the difference is between an independent contractor and an employee.
So how do you know if the person you have hired to work for you is an independent contractor or an employee? Well, there are a few factors that are to be considered. No one factor is more important than the others. Furthermore, the IRS will consider the totality of the circumstances to decide if an independent contractor truly is an independent contractor. Find out in this episode of All Up In Yo’ Business what these factors to consider.