Do you really have employees?
(or are they Contract Labor?)
The most important test concerns who has control over the services that are being performed. This checklist of 20 factors is from IRS guidelines. These are items that IRS reviews to determine who has the control and therefore if you have employees or contract labor.
1) Instructions
2) Training
3) Integration
4) Services rendered personally
5) Hiring, supervising, and paying assistants
6) Continuing relationship
7) Set hours of work
8) Full time required
9) Doing work on employer’s premises
10) Order or sequence set
11) Oral or written reports
12) Payment by hour, week, month
13) Payment of business/traveling expenses
14) Furnishing of tools and materials
15) Significant investment
16) Realization of profit or loss
17) Working for more than one firm at a time
18) Making service available to general public
19) Right to discharge
20) Right to terminate
Calling them subcontractors if they are not can carry expensive payroll tax penalties. If there is any doubt, treat them as EMPLOYEES.
Anyone you pay as contract labor must complete a form W9. We will need the W9 in order to issue an accurate form 1099 at the end of the calendar year.
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