Transitional Sales Report Distribution List
Over the last ten years, many companies have drastically reduced their permanent workforces, only to find that when business picked up, they were short of workers. Not wanting to hire permanent workers only to lay them off at the next downturn, many companies began hiring "contingent workforces," which include independent contractors, part-time employees, as well as leased, temporary, and outsourced employees. Unfortunately, many companies treat, for tax purposes, all contingent workers as independent contractors. If the worker is misclassified as an independent contractor instead of an employee, this can trigger costly tax penalties. Classifying an employee Generally, a worker may be classified as an independent contractor if the employer has the right to control or direct the result of the work, but not the means or methods of accomplishing the result. The IRS has a 20factor test to determine whether a worker is an employee or independent contractor. No one factor is determinative, and the nature of the company's business, as well as the industry standard, are taken into account. The factors listed by the IRS include: * Is the worker free from company control regarding how, when, and where the work is done?