Here's the skinny -
Some people try to commit fraud by lying and saying that employees are outside contractors. That's obviously illegal pretty much anywhere. It's perfectly legal to use actual independent contractors. It's just that if you want to treat them like independent contractors for tax purposes, you have to treat them as independent contractors on a day to day basis.

In general, with employees you pay for their time. With contractors, you pay for a result. Some differences between employes and independent contractors can include:

Employees are expected to arrive at a certain time and work a certain number of hours per day.
Contractors are expected to finish a project by a certain date, but work any hours they want.

Employees use tools provided by the employer, such as company computers.
Independent contractors use thrir own tools and equipment.

Employees personally do the work.
Contractors can hire assistants or sub-contract part of the work.

We have an employee here who was a contractor for us for a while. During his time as a contractor Ali started to say something about him being late and I had to stop her. Since we were treating him as a contractor, not an employee, we had no right comment on what time he came to work. He was his own boss. We were his customer, not his employer. Now, we want him here at a certain time each day, so he's now an employee.

great post :thumbsup

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Independent Contractors
 

1st off contact a CPA, not a lawyer. Most lawyers know nothing of taxes. A lot depends on the nature of the business. Most topless bars only will hire independent contractors.

The Govt usually cares less as
1 Either way the employee/contractor will have to pay all their income taxes, although independent contractors can deduct some expenses, but an employee would be reimbursed and the employer would deduct the expenses.
2 Either way the Govt will still get the Social Security tax. Independent contractor pays all or a 50/50 split between employee & employer.
3 Actually Govt comes out ahead on Workers Comp & Unemployment on an independent contractor, as an employee will most likely get back more than they had withheld.

My GF works as an independent contractor for a business that has employees doing the same exact job. There is nothing illegal about it and despite what posters have said, she does not have to be incorporated, nor is it illegal to hire independent contractors.

A lot of the independent contractor rules are in the Fair Labor Standards Act. It's mostly to keep companies declaring their employees independent contractors, so they can pay straight time instead of overtime.

The basic rule is an independent contractor, can have the option to have multiple employers. A web site designer is a perfect example. If he works at home it's easy for him to be an independent contractor. If he works in your office 40 hours a week he is probably an employee. Less than 40 it's a gray area.

You can always hire through a temp agency, costs more, but many companies believe the long term costs, especially not paying employee benefits are less. Also with an agency, you call them, say the employee is no longer needed and there's no worry of a firing lawsuit.

As for drug testing, I've worked for small and huge companies in the sensitive area of accounting. Mostly as a contract employee (temp), never was I required to take a drug test where regular employees had to. Many places I had more access than the regular employees to sensitive items (money or data). I took the trust I was given seriously and never did harm to an employer. I quit one job after 2 weeks when they falsely questioned my honesty over my medical insurance. I walked out of a job interview as I had to take an honesty test by telephone, 1 for yes, 2 for no. The recorded voice sounded like a supervisor at some cotton mill on Alabama and the sneer in his voice was "if you have to work, you're scum."
Drug tests are worthless. meet the person, get a feel for them. Most of the time you can tell the honest from crooks. But I've worked at companies where a grandmother that didn't even drink ended up arrested for embezzling.

As for the interview, I've got jobs just walking in the door. I also filled at a job application for a small business that was 10 pages long. Got the feeling the owner was a paranoid control freak and was going to be a pain to work for. Glad he didn't call back.

As stated previously, I think anyone who is serious about their business should have this conversation with their accountant/CPA and not trust GFY board lore. Ultimately, they are the ones' who sign off on your tax docs, and keep you in the good graces of IRS.

:2 cents:

He's back from his recent banning, and can now chime in for ye.

:2 cents:

What is the main accountant message board?

This is a good thread. :thumbsup