Employee or Independent Contractor???
Here's what Mr. Tax says:

       A big problem facing many small businesses is how to classify workers. Should they be treated as employees or independent contractors? It’s a decision that has major tax consequences because employees and independent contractors are treated differently for tax purposes.
       Whichever classification employers choose for their workers, the I.R.S. has specific reporting requirements for amounts paid: employees are reported on Form W-2 ‘s and independent contractors (unincorporated) who are paid $ 600 or more are reported using Form 1099.

       Taxwise - What’s the difference? Employees cost about 8 - 10 % more than independent contractors, including social security and unemployment taxes (that sounds bad). But if you elect to treat your workers as independent contractors and the I.R.S. later determines them to be employees - you pay all the taxes the employee should have paid (most could have been withheld from wages had you done it properly), plus penalties, plus interest (OUCH! that sounds very bad).
       The right to control is a major factor when deciding how to treat workers. "Business owners who set workers’ hours, provide them with tools, tell them what to do and how to do it, and can fire them, can usually bet those workers are employees" says the Internal Revenue Service.
       The I.R.S. has 20 classification factors they consider to make the determination of employee or independent contractor. For a free list, e-mail Mr.Tax, c/o ProNews.Net.     

       Mr. Tax’s humble opinion - This area has been and continues to be a hot item for the I.R.S. and the state unemployment compensation bureaus. They have been quite successful in prosecuting cases against employers.
       ALERT! If a worker looks like an employee, acts like an employee, smells like an employee - treat him like an employee. Trust me - you’ll sleep better at night - one less worry.

       If there are areas of a general nature that you would like to get more info on, e-mail your request to Mr.Tax, c/o ProNews.Net.

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