| Getting the Independent Contractor vs. Employee Classification Right

Posted in Employees, Payroll, Staffing at 9:00 AM by Loftis Consulting

With the Patient Protection and Affordable Care Act (PPCA) becoming fully effective in 2015, it will become more important than ever to get the independent vs. employee classification correct.  In 2015, any company with 50 or more employees will be required to offer healthcare insurance benefits to its employees working at least 30 hours per week.  Independent contractors are not considered employees and thus employers would not be required to provide insurance benefits for independent contractors and would be able to save money not only from employment related taxes but also from insurance costs. 

Given that the misclassification of independent contractors is an ongoing IRS issue combined with the upcoming implementation of PPCA, the IRS will be even more diligent in making sure businesses are following the rules.  The IRS provides the following guidance on classification:

1.  Behavioral – If the company has the right to control and how and what the worker does then he or she is not an independent contractor

2.  Financial – If the company controls how the worker is paid as well what is reimbursed and what tools are used then the worker is not an independent contractor.

3.  Relationship Type – If the worker receives employee-like benefits such as vacation pay and/or the relationship is such that it is critical to the ongoing operations of the business over the long-term then the employee is likely not an independent contractor.

It does not matter if you have a written contract in place.  The treatment of the worker will overrule any written contract if the nature of the work falls into one of the three categories listed above.  In addition, it does matter if the worker is full-time or part-time for classification purposes.  For more insight on worker classification, visit IRS.gov or discuss with your tax specialist.



1 Comment »

RSS feed for comments on this post. TrackBack URI

  1. […] Getting the Independent Contractor vs. Employee Classification Right (loftisconsulting.com) […]

    Pingback by What's in a Name? The Risks and Rewards of Independent Contractor vs. Employee Job Classification | Employee or Independent Contractor? — June 19, 2014 #

Leave a comment

You must be logged in to post a comment.

© Copyright 2003-2011. Loftis Consulting and Financial Management. All rights reserved. | Privacy Policy site by imediawerks