This is a question that a small business owner may ask himself at some point. He may respond by stating that his worker is indeed an independent contractor. The small business owner may think about the ways that the individual fits his idea of a freelancer, and he may be unequivocally wrong. Many people believe they know what an independent contractor is, but they are mistaken.
According to the Internal Revenue Service (IRS), a person is an independent contractor when he exercises control over how the work he is paid to do will get done. The individual who offers to pay for the job can only direct the result. Alternatively, an employee is a person who is employed by a business to perform a duty. He is expected to follow his superiors’ directives, and do his work according to their instructions.
The IRS indicates that there are two major points when determining whether a person is an independent contractor or an employee. The first factor is control. The employer can only control the end product or service. The second point is relationship. The IRS will look at the facts of a situation to determine how both the business and the worker perceive their relationship to one another.
When deciding whether the individual is an independent contractor or an employee, a small business owner may want to consider whether he has to provide the tools and resources for the worker to complete the job. He may want to think about whether the person is free to work for other businesses. Also, the small business owner may want to consider whether the job duties are an essential element to the company’s business. Last, he may want to think if he wants the worker to sign an employment contract. These are just some points to consider, the IRS will look at the entire relationship when determining whether a person is an independent contractor or an employee.
Although, many small business owners may think of their workers as independent contractors, it’s imperative that they make sure that they are following the IRS’ guidance on the matter.
