5 ms·

So I'm thinking this applies to me but I'm not sure. I work part time at a company and they pay me directly as a contractor. I do all my work there and am subj

• rjurney 17y ago
  Are you at risk? The law exists to protect you from exploitation - worst case they'd have to pay your self employment tax (7.5%), give you benefits, etc. right?
  • lsc 17y ago
    some would say that the law exists so that i have to go through some contracting house which eats 50% or more of my wage up front. To me, it seems more like ensuring exploitation than preventing it.
    • rjurney 17y ago
      That may be - but in the case he described he has already been paid as a direct contractor.
• grellas 17y ago
  It is the employer who is primarily at risk (I generally agree with rjurney's related comment). The traditional assessment (i.e., one done without regard to any safe harbor protections and also without going mindlessly through the "20 factors," which is usually not helpful) would run roughly as follows: (1) do you have a written agreement specifying that you are an independent contractor and setting forth terms that characterize an independent contractor relationship? (if you don't have such an agreement, the company basically loses out the gate on this issue in almost all cases); (2) are your services of the highly skilled type that people normally would pay an outside contractor to perform? (if so, this tips toward contractor); (3) are you truly in business for yourself and do the various indicia (yes, that is a lawyer word) of your work situation corroborate this (if sole proprietor, do you have a business license, a dba, a policy of liability insurance, etc. relating to your contract work or are you set up as an entity - these factors all tip toward contractor); (4) can you document that you perform services for multiple clients, that you hold yourself as doing so, and that your agreement permits work for others (if you have a website advertising your company, or if you in fact have done contracting work for multiple clients over a sustained period, etc., this tips toward contractor); (5) is what you do for your company a regular and recurring part of its business, for which it would normally hire an employee as opposed to more of a spot project such as helping develop a company's website? ("regular and recurring" tips strongly toward employee; "spot" tips toward contractor); (6) do you have to report to a specific place of work on a specific schedule? (tips strongly toward employee); (7) do you work under the direct supervision of any person at the company, whether a boss or a supervisor? (tips strongly toward employee); (8) are you required to complete a clearly defined "project" or must you show up at work to do whatever you are ordered? (the latter tips strongly toward employee). All of the above is another way of saying, "is this person really in his own business?" when performing duties for this company. If I am hired as the company's lawyer, my goal is to deliver a result on my own time and in my own way. If what you are doing is analogous to this, then you might truly be a contractor. If not, then you likely are not. Of course, check with a knowledgeable lawyer about your own specific case and concerning any risk or options should you be mis-classified. Can't give advice here about any specifics.
  • jerf 17y ago
    Does the employee get any say in whether he contests his status, or does the IRS tend to do this unilaterally? (This has obvious and multitude implications w.r.t. risk and reputation.)
    • grellas 17y ago
      Generally, the employee faces no risks arising from an employer audit. In fact, the employee is often pushing for a reclassification, e.g., when applying for unemployment benefits (available to employees only) after having been terminated as a "contractor." In practical terms, employees do have input at hearings in which an employer will challenge the results of an audit because it is the employees who are often the key witnesses in such hearings (this usually works to the severe disadvantage of employers though, as a parade of employees is often called in and asked, "did you have to report in for work at a specific time?", "is it true that your duties consisted of making telemarketing cold calls while strapped to a desk?," "are you telling me that making such calls non-stop from 8 to 5 every day signifies that you were 'in your own business' just because your boss made you get a business license?" - this often goes on and on to disastrous effect for the employer and, though I have framed it a bit facetiously here, this is about the spirit in which it occurs).
      • bd_at_rivenhill 17y ago
        So if you actually want to be a contractor because you prefer the freedom of owning your own business and the IRS tries to come in and classify you as an employee, then you get to tell them "no I really am a contractor" and they have to stick with that?
        • grellas 17y ago
          This whole area is, in a sense, like a rigged game because the tax laws are so heavily weighted in favor of wanting to classify people as employees. Therefore, if you try to claim you are a contractor, this will be given only the slightest weight, if any at all - in other words, in your words, they don't have to stick with what you say, and indeed normally won't (they will just apply their multi-part test and come to whatever determination they feel is justified). On the other hand, if you claim you are an employee, they will give that a lot of weight and will ask you considerable detail about all the factual points that tend to confirm that you are an employee (in order to nail your employer with the taxes/penalties that result from the reclassification). Everything is basically stacked against the person claiming to be a contractor. You can win on the issue but it is usually a tricky proposition. In most contested situations, you might win in two or three out of ten at most.