![]() The income is reported to the recipient and to the IRS at the end of each tax year on Form 1099. Accounts Payable does not withhold taxes from the payments. The compensation paid to independent contractors is taxable. This would indicate an employer-employee relationship. For example, if a law firm hires an attorney, it is likely that it will present the attorney’s work as its own and would have the right to control or direct that work. Services Provided as Key Activity of the college: If a worker provides services that are a key aspect of the college, it is more likely that the business will have the right to direct and control his or her activities.Permanency of the Relationship: If you hire a worker with the expectation that the relationship will continue indefinitely, rather than for a specific project or period, this is generally considered evidence that the intent was to create an employer-employee relationship.However, the lack of these types of benefits does not necessarily mean the worker is an independent contractor. Employee Benefits: Businesses generally do not grant benefits to independent contractors.Written Contracts: Although a contract may state that the worker is an employee or an independent contractor, this is not sufficient to determine the worker’s status. ![]() The factors, for the type of relationship between two parties, generally fall into the categories of: Type of Relationship: Type of relationship refers to facts that show how the worker and business perceive their relationship to each other. An independent contractor is usually paid by a flat fee for the job. Method of payment: An employee is generally guaranteed a regular wage amount for an hourly, weekly, or other period of time.Services available to the market: Independent contractors often advertise, maintain a visible business location, and are available to work in the relevant market.Opportunity for profit or loss: Having the possibility of incurring a loss indicates that the worker is an independent contractor.Unreimbursed expenses: Independent contractors are more likely to have unreimbursed expenses than are employees.Significant investment: An independent contractor often has a significant investment in the equipment he or she uses in working for someone else.The financial control factors fall into the categories of: The college does not have to actually direct or control the way the work is done – as long as the employer has the right to direct and control the work.įinancial: Financial control refers to facts that show whether or not the college has the right to control the economic aspects of the worker’s job. A worker is an employee when the college has the right to direct and control the worker. The Business Office may require that you complete and submit an Independent Contractor Checklist to help determine if your contractor should be paid as an employee or as an independent contractor.įacts that provide evidence of the degree of control and independence fall into three categories:īehavioral: Behavioral control refers to facts that show whether there is a right to direct or control how the worker does the work. The general rule is that an individual is an independent contractor if you, the person for whom the services are performed, have the right to control or direct only the result of the work and not the means and methods of accomplishing the result. Employers who misclassify workers as independent contractors can end up with substantial tax liabilities and penalties. It is important that the college make the correct determination as to whether the person is an independent contractor, or should be paid as an employee. They include many occupations where the worker is considered self-employed. Independent contractors are vendors who perform services for the college but are not employees of the college. For more information on obtaining a Purchasing Card, please refer to the Purchase Card Program web page. The Accounts Payable Staff in the Business Office processes payments to independent contractors however, please use your College Purchasing Card whenever possible.
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