If your business works with independent contractors at all, please continue reading.
I have spent some time in a previous post discussing the importance of ensuring your relationship with contractors is as watertight as possible. The stakes seem higher to me now after last week, when an inspector from a state agency who had initially found against my client admitted on my cross examination that it had based its decision solely on the claimant’s word.
If you have hired independent contractors, you know the rules surrounding that arrangement can be tricky and complex. You probably already know that the IC laws are somewhat unfair: in order to prove someone is an IC, the hiring business has to show things they have no control over. But what you might not know is that a finding against you may result in thousands of dollars in assessed taxes and penalties solely on the claimant’s word.
Some things to consider when assessing your IC relationships:
- Does the IC actually contract with other businesses?
- Does the IC have its own office?
- Does the IC have its own tools, equipment, etc?
- Does the IC market its own services?
- Does the IC have employees? If the IC can’t get the job done, does it hire another contractor to do the job?
- Does the IC have control over the means and manner of the work being done?
- Does the IC actually have insurance (for example, liability insurance)?
- Does the IC invoice you?
Although most of these factors aren’t uniquely determinative, and the list above is not a complete list of all the factors relevant in an IC audit, they are questions you should ask and to which you should know the answer. And although they are almost completely outside of your control, a “yes” to any of these questions means you are on the right track. As always, please contact me (don’t worry, I’m a legitimate independent contractor!) if you have questions or would like an internal IC audit completed.
Looking out for you!