A good while back I was doing payroll for a ‘smallish’ business….the owners were notorious for utilizing trust fund monies (all of them) to maintain their lifestyle….a colleague would always say that they treated the business as if it was their own personal ‘piggybank’….at one point, I was so very disgusted with continually watching them take trust fund taxes from the business, I requested that I be treated as an Independent Contractor….I was informed by one of the owners that it was against IRS ruling……hmmmm…..I thought, this person is using my money that should have been given regularly for safekeeping to the IRS for personal discretions and I’m being told that I cannot stop paying taxes. I put myself on 1099 regardless; the owner and the colleague were sent weekly reports by the payroll company (at my arrangement) for the duration of my tenure with the company which CLEARLY showed that I was a 1099 ‘employee’ and nothing was ever said to me at the time!!!
It was a big mistake on my part in the long run; it turns out, the IRS always catches up with people, the IRS (I later learned) would uphold whatever anyone’s trust fund contributions are…the employer is always responsible for paying them even if they have no monies left after ‘emptying the piggy bank’. The worst part is that I lost the ability to have that income applied to my social security and had to pay the employer percent of the FICA out of my own pocket…..that may, and probably will, change sometime in the near future for the IRS is very attuned to the behavior of organizations that repeatedly consider trust fund taxes their own personal 'piggy bank'. There are no guarantees in life, are there? I would have made a very good whistle blower….
So, the ‘moral’ of this story is if you are an independent contractor, you want to be and expect to be treated as such….if you are an employee, remain an ‘employee’ and appreciate the advantage of the benefits you receive….for social security is considered one of the mandatory benefits you receive as an employee along with Unemployment Compensation and Workers Compensation.
***Instructions: An employer should not tell an independent contractor how to do a job;
***Training: An employer should not provide substantial training for an independent contractor;
***Integration: An independent contractor should not be hired to provide a service that is an essential part of an employer’s business;
***Personal Services: An employer should not insist that work be performed by the contractor rather than someone that the contractor might hire;
***Assistants: Independent contractors control and pay their assistants;
***Length of Relationship: Independent contractors should not have a continuing relationship with an employer unless there are multiple contracts;
***Work Hours: An independent contractor usually determines the hours worked to complete a job;
***Amount of Work: An independent contractor should not be told to work full time for an employer if that would prevent the contractor from doing other work;
***Location: Unless the services can be performed only in one location, an independent contractor chooses where to do the work;
***Sequence of Work: Independent contractors determine the order in which they accomplish their tasks;
***Expenses: Independent contractors are responsible for their business expenses unless it is specifically written into the contract/agreement;
***Payment: Independent contractors are paid for the results of their work, not for the time worked;
***Reports: Independent contractors should not be required to produce interim reports;
***Tools: Independent contractors typically provide their own equipment and tools;
***Investment: An independent contractor has a significant investment in his/her business, such as a home office;
***Profit: Independent contractors can realize profits and incur losses;
***Multiple Jobs: Independent contractors can work for more than one employer at a time;
***Availability: Independent contractors make their services available to the general public;
***Termination: Independent contractors cannot be fired at will, as can employees;
***Liability: Independent contractors are liable for failure to complete a job.
The Small Business Job Protection Act of 1996, simplified the rules for determining the status of independent workers. If an employer satisfies the requirements of a reasonable basis test for classifying independent contractors and cooperates with reasonable information requests from the IRS, the burden of proof switches to the IRS to prove that an individual is not an independent contractor.
A true definition of an Independent Contractor is someone who supervises themselves, pays their own taxes and is not an employee. If you, as a business owner, would like clarification as to the designation of a particular worker or if as an employee/independent contractor, you have questions regarding your status, please contact Rosanne Bennett at firstname.lastname@example.org or 484-798-1236.