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Goldburd McCone LLP
New York City Tax Lawyers

Are my workers employees or contractors?

As a business owner, making hiring decisions is one of the most important duties of your job. Talented employees contribute to the success of your business in immeasurable ways, but you know that you don’t always have to rely on employees to get the job done. Labor practices in business are changing, giving rise to a growing number of companies and workers who rely on contract work to make ends meet.

According to the Wall Street Journal, as many as 20 million people are working as contractors in America. These people include independent contractors, temporary and on-call workers. They work in almost every industry, but most notably in logistics and transportation. As the supply and demand of contractors grow, so will the debate surrounding their classification for tax purposes. How can you tell if your contractor workers are classified correctly?

No clear cut rules

Unfortunately for business owners, there isn’t a clear cut rule that makes someone an employee or a contractor. Instead, the context of their duties and their relationship to the business come into account when making this determination.

The IRS believes a person’s status depends on a few key factors in the relationship. Business owners can ask themselves a set of questions about their employees when making a determination.

These questions are based on the factors the IRS considers and the agencies 20 question test in determining work that is eligible to be paid via a 1099-misc.

  • Do I control what the worker does, when they do it and how they do it?
  • How is the worker paid and reimbursed for expenses?
  • What tools do I provide that help them get the job done?
  • What benefits, if any, do I provide to the worker?
  • Will the relationship continue after the work is complete?
  • Is their job an essential function of the business?
  • Can the worker only do these duties for my company?

While there aren’t fast and easy rules for determining what workers can be classified as contractors, employers can rely on the guidance of a tax attorney in this process. The attorneys at Goldburd McCone LLP have more than 40 years of combined experience helping business owners answer these tough questions.

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