Tax Tip: Should You Classify Your Workers As Employees or Independent Contractors?

You might hire employees and independent contractors for similar work, but there are important differences in how they are classified. Here are a few questions to consider:

  • Does the company have the right to control what the worker does and how the worker does the job?
  • Does the business direct or control the financial and business aspects of the worker’s job?
  • Are the business aspects of the worker’s job controlled by the payer?
  • Are there written contracts or employee-type benefits such as a pension plan, insurance, and vacation pay?
  • Will the relationship continue, and is the work performed a key aspect of the business?

Correctly classifying your workers is essential to avoid issues with taxes or liability.

* This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax professional.

Tip adapted from IRS.gov8

Footnotes and Sources

8., August 2, 2022