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Thread: Crackdown on Using Independent Contractors

  1. #1
    Mr. Tax Man Array
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    Default Crackdown on Using Independent Contractors

    We have many discussions regarding independent contractors vs. employees here. Many have indicated that there is a crackdown on this, though the article below certainly emphasizes this is happening.

    New Crackdown On Using Independent Contractors - Forbes

    Specifically of interest may be the legislation that was proposed regarding what information may have to be provided to independent contractors regarding a request for reclassification.
    Small Business CPA
    "A tax loophole is something that benefits the other guy. If it benefits you, it's tax reform."

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    I think the misunderstanding comes into play because may of the employers don't know how to classify the employees and the contractors. This will lead to mistakes when they file business taxes causing the IRS to lose money and possible getting the employer into legal trouble. When someone goes to start a business it might be a good idea for them to receive a list of the duties, privileges employees and contractors have.

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    From experience, you should consider anyone that you use as an employee and pay the associated taxes etc. Now you can hire them as a sub contingent on many required elements. So to be a sub you should request the following documents from the sub:
    1) Copy of business license
    2) Copy of professional certification if required in your industry
    3) Copy of workman's comp certificate
    4) Copy of liability insurance
    5) Have them prepare a W-9 form from the IRS
    6) Have them sign a contract with terms etc.

    If this guy/gal is going to work for you more than 20 hours a week for more than a few months, then most likely they are going to be classed an an employee by the IRS. The key is the relationship between the two parties. But if you can't get past items 1-6, then they are going to be classed as an employee.

    Dave

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