hi lee phillips again i want to talk to you about independent contractors versus employees this is
becoming an issue well it's always been an issue but since the irs is beefing up big time this is
going to be an area where they look at and that is did you pay your employment tax basically is what
the argument is the independent contractor he pays his own self-employment taxes if it's an employee
the employer pays half and the employee pays the other half and it's the same amount but
somebody's got to pay it and they want to make sure that they collect it from the employer
if at all possible and then the gig is is when they actually audit you if they determine that
the guy is not an independent contractor but is an employee then they're going to hit the company
you for all of the back taxes whether or not the employee is actually paid a self-employment tax
they're going to hit you for the taxes and the penalties and it's obscene they will negotiate
it down but it's going to be cheaper for you to pay all of this tax than it is to fight
the irs so you get to pay it now in theory the employee or independent contractor could get a
refund on the taxes but nobody ever notifies him that he has been reclassified and he's gone
so it's kind of a mess for the little employer let's kind of go through it
the independent contractors got to meet 20 tests under the irs rules
not all of them but if one of them is out of order then they've kind of got you the
big one right now seems to be the lice business license does this guy have a business license
if he doesn't have a business license then the irs is automatically going to say he's an employee
so get a copy of the guy's business license actually put it in the file with the uh
with the payroll and whatever you the 1099s whatever you're doing for this guy okay
get the business license and make sure that you are paying a company the irs isn't going to be
nearly as suspicious if the check from you goes to somebody llc or somebody corporation
rather than john doe if it's john doe llc okay that might be an independent contractor because
employees usually don't set up an entity to operate under and like i say there are these
20 criteria does he use his own equipment how much control do you have this that and the other if you
want a copy of the 20 uh just email info info at legalees l-e-g-a-l-e-e-s dot com info@legalees.com
and we'll just send it out to you no charge or anything and in the subject line just put
independent contractor versus employee list so we'll get that out to you but make sure
that you're paying to an llc or corporation that's going to save you a lot of trouble make sure that
you've got a written contract with this guy it's called a an independent contractor's agreement
and i have a number of them they come in different form sizes and shapes and colors but read through
get the one that best fits your situation and have the guy sign it so the primary reasons that
you want the guy to be an independent contractor versus an employee is he's not entitled to any
benefits he doesn't get the health insurance he doesn't get anything else he's independent and
you don't have to pay the your half of the self-employment taxes on him so it saves you there
the other aspect of it is is you're not liable for any of the stuff that this guy
causes any of the problems the lawsuits anything he does wrong you're not liable he's independent
of you and if you'll read a lot of the agreements that you're signing with people it always says
we are independent we are not agents we are not employees we are not this that and the other so
the written agreement is a critical part of this whole thing written agreement business license pay
to an llc corporation rather than an individual's name those are your best shots at staying out of
the irs's radar for an audit as to whether or not this guy is an employee and i see lots of
people the whole office is independent contractors yeah bs they show up every morning they work eight
to five they have a desk they have meetings they tell you what i mean they're employees but in
order to get out of pain the self-employment tax and and the benefits and everything they company
classifies them as independent contractors that may be a little harder to do because
it's an employee's world now employers are looking they're trying to hire whoever they can get and
this guy wants to be an employee because he wants all the benefits and stuff undoubtedly
does he work for other people what happens get the list of 20 go down make sure you
can qualify the individual on as many of these as possible and remember that you've got independent
contractors and employees independent contractor versus employee which one is he now don't forget
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could save somebody skinny lee phillips independent contractors versus employees