The best way to avoid mis-classifying workers is to understand the defining characteristics of independent contractors — and then treat them as such. Use this to help you identify independent contractors and understand how they are different than employees.
Independent contractors checklist
Use this list to help determine if you or the person who does work for your business should be considered an independent contractor. An independent contractor:
- Pays self-employment taxes (Social Security and Medicare).
- Is trained in their profession.
- Can work with many employers at one time (different clients).
- Controls when, how and where the work is done.
- Negotiates rates on a per-job basis.
- Uses own tools and equipment to perform the work.
- Does not receive employee benefits.
- Works on a profit/loss basis.
- Does not receive overtime pay.
Defining an independent contractor
The IRS says an individual is an independent contractor if the payer (employer) has the right to control or direct only the result of the work, not what will be done and how it will be done.
Unlike independent contractors, employees are protected by various employment laws, including:
- Fair Labor Standards Act (FLSA)
- Family and Medical Leave Act (FMLA)
- Occupational Safety and Health Act (OSHA)
- Americans with Disabilities Act (ADA)
- Unemployment compensation
- Workers compensation
130+ million U.S. workers are protected by the FLSA.
57.3 million people freelanced in 2017.
1 in 5 jobs is a contracting job in the U.S.
As always, should you have any questions or concerns regarding your tax situation please feel free to call.