Your brand is built on your company’s reputation and nothing can give you a bad rep like getting in trouble with the IRS.  For small business owners that “trouble” can come by wrongly classifying the help they are receiving from third parties.  Is your help an employee or independent contractor, knowing the difference can save you thousands in penalties and fines from the IRS. Generally business owners must hold income taxes, pay Social Security, medicaid and unemployment taxes on employees, while these same taxes are not paid for independent contractors. Many business owners want to avoid having actual employees for this reason. Establishing an independent contractor relationship can be done through written agreement however in addition to your intent the IRS also takes into strong consideration how much control the business owner has over the worker. For example:

– When delegating task does the worker have control over what work he does and how the work is completed
– Who is responsible for expenses and supplies related to the job
– Is the work a key aspect of the business

Your answers will help determine whether  an employee or independent contractor relationship exsit. The employee/ independent contractor relationship is important for more than tax purposes, depending on the relationship you may also be responsible for the actions of a third party. If you need help determining the nature of the relationship between you and your help us the contact us  for more information.