Hanna Consultant Group

EMPLOYEE VS. INDEPENDENT CONTRACTOR

With challenges to the economy, companies are looking for every way possible to save money. A potential risk for employers is to mischaracterize an employee as an independent contractor, which may save payroll taxes in the short term but may lead to penalties on such taxes as well as other inadvertent violations of worker's compensation laws, FMLA, etc, which each hold separate penalties for violation.

There are also state law implications, which vary by state so you may want to consult an attorney in your particular state as to that state's definitions.

Focusing purely on federal issues, the IRS previously had a 20-part test to evaluate whether a worker is an employee or independent contractor.

However, the new and improved IRS test focuses on three areas: (1) behaviorial control, (2) financial control, and (3) the type of relationship.

  1. Behavior control addresses the amount of instruction given to a worker, such as work hours, specific job duties, and training.
  2. Financial control addresses the extent to which a worker can realize a profit or loss or seek reimbursement of business expenses.
  3. The third type of control is the type of relationship. Factors include the presence or absence of a written agreement and the permanency of the relationship.
Marquis Aurbach Coffing has an excellent employment department and can answer specific questions in more detail concerning your business. They can also document employment agreements or properly document independent contractor agreements should the workers qualify as independent contractors. Please do not hesitate to contact us. Please follow the link in the left column of this newsletter for more information from the IRS's website.

Ms. Drury is a Shareholder in the firm of Marquis Aurbach Coffing in Las Vegas, Nevada, and is chairperson of their transactional department. Drury was named a Leader in the Field of Real Estate for 2011 and was also named by Best Lawyers in America in the specialties of Corporate Law and Real Estate Law for 2011. Ms. Drury's practice focuses on transactions, with an emphasis in real estate. She documents and oversees entity formation, land and business acquisition, construction agreements, loans (construction and permanent), general operational and contract needs, and the ultimate sale of land or improved properties and businesses. Ms. Drury serves on the Executive Committees of the State Bar of Nevada's Real Property Law Section and Business Law Section, which, among other things, draft statutes for consideration and adoption by the legislature of the State of Nevada. Prior to joining Marquis & Aurbach, Ms. Drury served as Associate General Counsel at Station Casinos, Inc. Ms. Drury has a Bachelor of Arts in International Relations and Print Journalism from the University of Southern California, with a minor in Business Administration. She has a Juris Doctor Degree from the University of California, Hastings College of the Law.

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