What is an employee? Info we all can use.

Discussion in 'Lawn Mowing' started by grass-scapes, Feb 20, 2008.

  1. grass-scapes

    grass-scapes LawnSite Bronze Member
    Messages: 1,552

    This is captured from a website that deals with the IRS. There is also a good story on MSN. I will put the link at the bottom. With the season fast approaching, this question will be asked over and over again. I thought I would bring all the info together in one place. Here we go...

    Who Is An Employee?

    The IRS Definition

    The Internal Revenue Service uses these criteria to determine whether an individual is an employee or an independent contractor. The worker is an employee if...

    You or your representative tells the worker where, when, and how to work.
    You train the worker.
    The business performance depends on the worker.
    The worker has a continuing relationship with the company.
    The worker’s services must be personally rendered by the him/her.
    You set the worker’s work hours.
    The worker works on the employer’s premises.
    You are paid by the hour, weeks, or month.
    You furnish tools and materials.
    You can fire the worker without violating a contract.
    The worker has a right to quit without incurring a liability.
    The worker does not offer the worker’s services to the public at large.
    The worker has no opportunity for profit or loss as a result of the worker’s service.
    The worker has no significant investment in the business.
    You require the worker to submit oral or written reports.
    The worker is a corporate officer.

    Section 530 Safe Harbor Rules

    Section 530 provides certain safe-harbor rules. If you could fall under these safe-harbor rules, the IRS could not re-define the worker as a employee. In general if, the

    company treated in individuals consistently as a contractor, and the
    company was in full compliance by filing all required forms such as Form 1099, and if, the
    company could rely on one of three basis for their practice of carrying the worker as a contractor
    Judicial precedent (A court case in the company’s favor)
    Past IRS Audit (A past IRS audit determine the worker to be a contractor)
    Industry Practice (There is a long-standing recognized practice of treating such workers as contract)
    then, the IRS could not change the status of the worker to employee.

    20 Common Law Factors

    Service rendered personally
    Hiring, supervising, and paying assistants
    Continuing relationship
    Set hours of work
    Full-time work required
    Doing work on business owner’s premises
    Accomplishing work in certain order or sequence
    Submission of oral or written reports
    Method of payment
    Payment of business or traveling expenses
    Furnishing tools and equipment
    Significant investment
    Realization of profit or loss
    Work for one entity at a time
    Offer their services to the general public
    Right to discharge
    Right to terminate

    The link to this story, which deals with FEDEX and their drivers is http://articles.moneycentral.msn.com/Taxes/CutYourTaxes/AreYouPayingYourBosssTaxes.aspx
    There is a link to an irs article on the second page.

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