Determining Employee Versus Independent Contractor Status

As an employer, determining whether one is a contractor or employee can sometimes prove difficult. However, it is essential to choose the right status for tax purposes because misclassification is a major problem for businesses in Cherry Hill and across New Jersey.

I have helped clients deal with the aftermath of classification errors, and I want to help you avoid the worst of this problem. When you’re deciding on how to classify someone in your company, consider the following:

Instructions – Direction And Control

Employees generally follow instructions about when, where and how work is to be performed; contractors establish their own hours and have no instructions regarding how the job should be completed.

Training

Employees typically receive training via classes and meetings regarding how services are to be performed; contractors generally establish their own procedures and receive no training.

Services Rendered Personally

Services are typically performed personally by the employee; contractors may utilize others to perform job tasks and duties.

Supervision

Most employees are supervised by a foreman or representative of the employer; contractors generally are not.

Set Hours Of Work

An employee’s hours and days are set by the employer; contractors dictate their own time and are often retained to complete one particular job.

Full-Time Required

An employee typically works for only one employer; contractors may have several jobs or work for others at the same time.

Work On Premises

Employees work on the premises of an employer or on a route or site designated by the employer; contractors typically work from their own premises and pay rent for their own premises.

Manner Of Payment

Employees are generally paid in regular amounts at stated intervals; contractors are paid upon the completion of the job or project in a lump sum or other arrangement such as on a commission basis.

Furnishing Of Tools And Materials

Employees are usually furnished tools and materials by employers; contractors typically furnish and pay for their own tools, materials and expenses.

Profit

Employees generally receive no direct profit or loss from work performed, while contractors do.

Job Security

Employees may be discharged or quit at any time without incurring liability; contractors are typically discharged after a job is completed and are legally obligated to complete a particular job to avoid liability.

Call Me For More Answers On Sensitive Tax Questions

As a New Jersey tax lawyer, I know the ins and outs of the federal and local systems. I know how to save you money and help you resolve any tax audits or problems. It’s not easy dealing with the IRS, so let me do it for you. Call 856-665-2121 or send an email to find out how I can help you.