Hi. Lee Phillips again.
Yeah I'm an attorney. don't hold that against me.
I want to talk to you for two seconds about
independent contractors versus employees
When you're a little company
one of the main things that you're going to look at
is do I hire this guy as an independent contractor
or do I hire him as an employee?
Now the first need jerk reaction is
let's hire him as an independent contractor
that way we don't have to pay
the Medicare
the Social Security the FICA the FUDA
the unemployment taxes all that sort of stuff
in fact it saves you 16%
So let's hire him as an independent contractor.
Well that's great
until the IRS audits you
and decides that he's not an independent contractor
he's actually an employee.
As soon as they pin the employee label on him
they will go back and they will collect
the 16% plus damages and all the rest of this and then the other crap
which the IRS is famous for.
So you better make sure that the guy is an independent contractor
if you're gonna hire him as an independent contractor
and not as an employee
because you have to do the pulling and everything else from the employee.
You're responsible for this guy.
If he causes the accident
you're responsible for it if he's the employee
if he's the independent contractor
then he's not
or you're not responsible for his accident
out on the street.
You're not responsible to pay his taxes,
withholding self-employment taxes all of that sort of stuff, that's his problem.
So it's a lot cleaner if I can get him as an independent
but if I screw up
and he's really an employee
then I get hit by the IRS
and by the way
if the guy's smart enough to figure out he's really an employee
and he doesn't pay all these taxes
even he's income taxes
you're going to be responsible.
Don't you love it?
So how do you know
If he's an independent contractor?
First thing is do you have a written contract with him?
Do you have a contract
which says he's an independent contractor
or an employment contract?
Did he fill out a W-4 for you?
W-2 all that sort of stuff--did he fill that out?
as an individual which says he's an employee?
If he's filled that out you'd better be withholding
and all that sort of stuff.
Does the guy use these own equipment
or do you supply everything for him?
Can the guy make a big profit?
If it doesn't work out, right? Can he lose?
Can he suffer a loss?
Or do you cover everything?
For an employee you cover everything.
You supply the tools,
everything else.
Do you tell him when he's going to work?
if you do
probably more like an employee.
And by the way there isn't one thing
that establishes independent contractor versus employee,
it's what we call the weight of the evidence.
Does he work for other people?
If you're only one of his employers
or one of the people he supplies his goods or services to
then you know that's
looking more like an independent contractor than an employee.
If he's working only for you
probably an employee, think about that one.
Does he work at your facility
or in his facility
so what's the relationship?
What did he think he was? Did he think he was an employee?
Do you supply him with
insurance
retirement
pension
401k
all that sort of stuff?
That's an employee.
That's not an independent contractor.
So the IRS is going to come in
the courts when they're trying to hold you liable
for what he did
all of these people are going to come in and they're going to look
at this long list of factors and
and you can go to the IRS
they have an SS8 is what they call it
or now it's online
you can go in and they'll run you through
and give you this full list and
you answer yes or no
and they'll tell you he's an employee or he is an independent contractor.
So they'll actually help you out.
Go to their website.
Type in independent contractor--it'll come right up
and you can see all of the stuff
that the IRS has on it.
It's kind of asset protection, though.
If I can get the guy as an independent,
I'm not liable for him.
So I always say never hire an employee
if you can get the guy as an independent.
Lee Phillips just with a thought on independent contractors