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TheNewGuy
02-10-2010, 05:47 PM
I have a friend who is willing to do a few hours of clerical work for me, but I don't want to hire them as an employee. Can I pay them as a service and just write them a check and have them claim it on their personal taxes without any snafu's? I'm new to all this.

nealrm
02-10-2010, 11:31 PM
Here is a link to the IRS page that explains the difference between and independent contactor and an employee. Click Here (http://www.irs.gov/businesses/small/article/0,,id=99921,00.html)

In short I'm going to say that guy would be an employee.

Business Attorney
02-11-2010, 12:55 AM
A part time employee is still an employee. Offhand, it sounds like the person would be an employee. I have written an article on my website that discusses the various factors listed on the IRS web page that nealrm linked to: Independent Contractor or Employee? (http://www.illinoisbusinessattorney.com/articles/independent_contractor_vs_employee.html)

Steve B
02-11-2010, 04:32 AM
Is it going to be a few hours total - or a few hours a week on an ongoing basis?

If it's just a few hours in total for one specific project - then he may never work for you again - then I would just cut him a check and put it under Office Supplies or Misc. I'm sure this isn't the officially correct answer - but I would take my chances on something this small.

If it's going to be a few hours a week on an ongoing basis - it could be either. Depending on the amount of direction you give him - and several other factors that I'm sure are explained in David's article.

Spider
02-11-2010, 11:29 AM
I have often wondered about this - the situation seems most unclear to me. One may purchase a service - like an oil change for one's car - on a regular basis, without considering those people employees. Why would hiring someone on a regular basis to do one's books be considered an employee?

If it's because of where the service is performed, what if the automechanic came to my home or office to do the oil change - does he then become an employee? I don't think so. Do I have to report the plumber who installed a new water heater at my office as an employee? I don't think so.

If it is a question of how much control you have over the person doing the work, what about the lady that comes in to clean my house once a week? I have as much control over her performance as I would any employee, so does that make her an employee? If so, does the cleaning company that I might hire instead become an employee, or do their employees become my employees? I have just as much control over how they do their job, what time they come, etc, as I do for any direct employee.

Do I have to list the shoe repair shop that repairs my shoes, as an employee? - the people at the dry cleaners who wash my shirts and dry clean my suits? - my personal coach whom I consult on a regular basis? - my doctor? - my dentist?

It all seems like a load of nonsense to me, but maybe that is the purpose of the IRS code - to keep us all confused and make work for CPAs! (Not the CPAs who are members of SBF - only the others!)

Business Attorney
02-11-2010, 01:38 PM
Frederick, it can be complicated to determine whether individuals are employees or independent contractors at times, but most of the examples that you give are clearly not employees. The reason is that they regularly do the same thing for many different people. While that is just one of the factors, the 20 factors are not given specific weights, so a single factor can be almost determinative in some cases.

That is why a person who has a bookkeeping service may spend 5 hours a week on your books and not be an employee while someone else may come in to your office 4 hours a week to just do your billing and be considered an employee.

Of all the examples you listed, the only one who might often be an employee is the woman who comes in to clean your house. That would depend on a number of factors and is probably often not the case. The others (doctor, dentist, plumber, personal coach, etc...) all presumably are in business for themselves. Even those professionals COULD be an employee under the right circumstances (e.g., a personal round-the-clock physician) but it is highly unlikely in 99.999% of the instances.

Spider
02-11-2010, 06:00 PM
Thanks, David. My post was a rant as much as a question - I appreciate your answer, nonetheless. Your work must be very interesting!

Evan
02-12-2010, 08:56 PM
It all seems like a load of nonsense to me, but maybe that is the purpose of the IRS code - to keep us all confused and make work for CPAs! (Not the CPAs who are members of SBF - only the others!)

The Internal Revenue Code is created (and amended) by Congress. The Internal Revenue Service can only administer their laws, and they ultimately get the blame for everything "bad". Blame Congress :D

Evan
02-12-2010, 09:05 PM
Control is the biggest thing to look at, but it is admittedly very confusing.

If a person comes to your business every week to provide bookkeeping services, but you're providing the computer, software, and want them there during specific hours... you have an employee.

If a person comes to your business every week to provide bookkeeping services, with their own laptop and software, when they are available, and they can come and go at their own, you have an independent contractor.

If the person is in the business of performing this type of service, they're probably a contractor. So if you hired a person to answer phones, you have an employee. But if you hired a person who answers phones for several companies through this virtual office system, you have a contractor.

Also, you pay an employee by the hour, and sometimes you do the same with contractors. But some also charge by the project, regardless of time.

TheNewGuy
02-14-2010, 06:24 PM
yeah the person is open to doing it for other people, but isn't at the moment. They wouldn't have a set schedule and in fact would probably do 90% of the work remotely on their own equipment.

It's confusing to find quick information on some of this stuff when you need it!

sequoiapayroll
07-05-2010, 05:31 PM
Best rule to live by...If you are supplying ANYTHING to a worker, they are a employee in the IRS eyes.