; EMPLOYEE vs INDEPENDENT CONTRACTOR
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EMPLOYEE vs INDEPENDENT CONTRACTOR

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									EMPLOYEE VS INDEPENDENT
      CONTRACT

           PRESENTED BY
         BONETTA J. BOND
SENIOR EMPLOYMENT TAX ACCOUNTANT
      HCA HEALTHCARE, INC.
 It is often much less expensive for a business
  to use independent contractors to provide
  services because the taxing and reporting
  requirements are much less costly than they
  are for employees.
     An employee – employer
     relationship exists if

The employer has the right to control what work
  will be done and how that work will be done
    Common Law Test Control
            Factors


 Behavioral Control

   Level of instructions the business gives the worker


   Level of training provided to the worker
      Common Law Test Control
              Factors
 Financial Control
   Whether the worker has unreimbursed business
      expenses
     Whether the worker has a substantial investment
      in the work
     Whether the worker’s services are available to the
      public
     How the worker is paid
     Whether the worker can realize a profit or incur a
      loss
    Common Law Test Control
            Factors

 Type of relationship

   Whether there is a written agreement
   Whether employee-type benefits are provided
   The term of the relationship
   Whether the worker’s services are an important
    aspect of the business’s regular operations
      Reasonable Basis Test


 An employer may treat an employee as an
  independent contractor exempt from federal
  payroll tax laws as determined by the Section
  Relief Requirements based on
   Court decisions
   A past IRS audit results
   A longstanding, recognized practice in a
    significant segment of the employer’s industry
Section 530
          ABC Test



         Absence of Control


    Business (usual and/or away)


 Customarily Independent Contractor
Statutory Employees

 Agent drivers or Commission drivers


  Full-time insurance salespersons


            Homeworkers


 Traveling or City (local) salespersons
 Statutory Employees General
        Requirements
 They must agree with the employer that all
  services are to be performed personally by the
  worker
 They must not make a substantial investment
  in business equipment or facilities (other than
  transportation
 Their work must be part of a continuing
  relationship with the employer, rather than a
  single transaction
Statutory Nonemployees


   Qualified real estate agents



          Direct sellers
     Statutory Nonemployees
      General Requirements
 Most of their compensation must be directly
  related to sales or other work output rather
  than the number of hours worked

 Their work must be performed under a
  written contract providing that the individual
  will not be treated as an employee for federal
  income, social security, Medicare, or FUTA tax
  purposes
Temporary help agencies


      Hire the temporary worker


     Screen the temporary worker


      Train the temporary worker
         Leased Employees
   Leasing company hire, train and qualify
        employees for the client company

                    BUT

Client company may have right to hire and fire
    leased workers, set wage levels and supervise
    their work
 Worker Misclassification

Employers that misclassify employees as
nonemployees or independent contractors
face substantial financial penalties as the
result of not withholding income tax, failing
to withhold and pay employment taxes, and
failing to file the correct reports and returns
with the IRS, SSA, and state government
agencies
 IRS Enforcement Efforts



 Conducts 6,OOO random employment tax audits
  over a 3 year period for a National Research
  Program

 Shares information with state agencies
            IRS Penalties



 For not withholding federal income tax, the
  tax assessed is 1.5% of wages paid

 For not withholding the employee’s share of
  social security and Medicare taxes, the tax
  assessed is 20% of the employee’s share
          Intentional
       Misclassification
If the employer intentionally misclassifies the
worker as an independent contractor even
after determining an employer-employee
relationship exists, special assessments do
not apply and the employer is liable for the
full amount of federal income tax that should
have been withheld and 100% of the
employee’s and employer’s share of FICA
New hire reporting must include

             New hire’s name
            New hire’s address
     New hire’s social security number


            Employer’s name
           Employer’s address
             Employer’s FEIN

								
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