INDEPENDENT CONTRACTOR RULES
BY : Harry P . Wills III BOWMAN & COMPANY
Independent Contractor Rules Debated In Senate
Employers that depend on independent contract workers should prepare for some potential good news and bad news . The good news is that if the IRS determines that an independent contractor should actually be classified as an employee , the employer won ’ t have to pay any back taxes , benefits , or penalties . The bad news is that they will need to get these individuals on the payroll — and pronto !
For years , the number of independent contract workers has been growing . Between 2010 and 2014 , a full one-third of workers added to the job force were classified as “ 1099 employees ,” according to the national nonprofit Jobs for the Future — a number that is only poised to grow . One reason is that it gives employers more flexibility in shifting the size of their workforces according to their business ’ seasonality or other factors . They also save big by not having to offer these workers healthcare insurance , vacation time , or retirement benefits .
The IRS guidelines determining employment status — whether an independent contractor label is allowed — are complicated , and it isn ’ t difficult for employers to classify someone incorrectly . The Agency ’ s long 20-point checklist has many gray areas , which can be interpreted such that workers are wrongly excluded from full-time employee status .
In an effort to get more workers classified correctly , the Senate has introduced legislation to simplify the 20-point checklist into a simpler three-point code . Here is a sampling of the 20-point guidelines , followed by the simple three-point proposal :
Implementation of this simplified legislation would be a win-win for everyone involved , allowing employers to embrace their dedicated contractors and , if necessary , make them full participants in their workforces without undue past expense . Contractors would reap the considerable benefits of being regular employees . Stay tuned as the situation in Washington unfolds . For more information , research the New Economy Works to Guarantee Independence and Growth Act of 2017 , also referred to as the NEW GIG Act of 2017 . +
Harry P . Wills III joined the Firm in 1986 and was admitted as a partner in 1997 . He is licensed to practice as a Certified Public Accountant in New Jersey and Pennsylvania and is also a Chartered Global Management Accountant . Mr . Wills ’ area of focus is in taxation and the audits of employee benefit plans . His clients include law firms , insurance agencies , construction and manufacturing corporations , wholesalers and distributors , hotels , and investment entities .
20-POINT GUIDELINES 1 . Does the worker have an investment in the equipment and facilities used to do the work ?
2 . Does the worker offer services to the general public ? 3 . Do you train the worker to do the job in a particular way ? 4 . Do you set the worker ’ s hours ? 5 . Do you provide the worker with equipment , tools , or materials ? 6 . Does the contractor work for more than one firm ? 7 . Is he or she paid set fees at regular intervals ?
THREE-POINT GUIDELINES 1 . Is the provider obligated to service only the potential employer to the exclusion of other clients ?
2 . Does the contractor have a separate work space outside the company and utilize his or her own tools ?
3 . Is there a written contract that would acknowledge the provider ’ s independent status ?
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