Independent Contractor vs. Employee

As the year comes to a close, many small business owners are preparing to close out their last minute entries in their accounting system. Classifying payments made for expenses like utilities, office supplies, and telephone come easily. The shady area for many is how to enter transactions for payments for outside services, subcontrators, and employees.

Below are guidelines that the IRS has created to help employers determine whether a worker should be treated as an employee or an independent contractor for tax purposes. Those 20 guidelines are:

1. Instructions. Employees comply with their employer's instructions about when, where and how to work, or the employer has the right to control how a worker's work results are achieved. Independent contractors have more flexibility.

2. Training. Employees may receive training from their employers to perform services in a particular manner. Independent contractors usually use their own work methods and receive no training from those purchasing their services.

3. Integration. Employees' services are usually integrated into the business's operations because they are key to the success or the continuation of the business. Independent contractors are independent of the business's operation.

4. Services Rendered Personally. Employees render services personally. Independent contractors render services as contractors.

5. Hiring Assistants. Employees work for an employer. Independent contractors can hire, supervise and pay assistants under a contract that requires them to provide materials and labor and to be responsible for the results.

6. Continuing Relationship. Employees generally have ongoing relationships with their employers. Independent contractors' relationships will usually be more sporadic.

7. Set Hours of Work. Employers usually set their employees' work hours. Independent contractors usually set their own hours.

8. Full-Time Required. Employees may be required to work or to be available full-time. Independent contractors may work when and for whom they choose.

9. Work Done on Premises. Employees usually work on their employers' premises or on a route or at a location approved by their employers.

10. Order or Sequence Set. Employees may be required to perform services in the order or sequence set by their employers. Independent contractors can establish their own sequence.

11. Reports. Employees may be required to submit reports to their employers. Independent contractors are not required to submit reports to their clients.

12. Payments. Employees are paid by the hour, week or month. Independent contractors are usually paid by the job or through a commission.

13. Expenses. The business and travel expenses of employees are generally paid by their employers. Independent contractors are responsible for paying their own expenses.

14. Tools and Materials. Employers normally furnish their employees with the key tools, materials and other materials they need to do their jobs.
Independent contractors normally furnish their own tools and materials.

15. Investment. Employees normally do not invest in the facilities. Independent contractors have a significant investment in the facilities they use to perform services for someone else.

16. Profit and Loss. Employees do not experience a profit or loss; independent contractors can.

17. Works for More Than One Person or Firm. Employees usually work for one firm at a time. Independent contractors may work for multiple persons or firms at the same time.

18. Offer Services to the General Public. Employees usually work for one employer. Independent contractors make their services available to whomever they want.

19. Right to Fire. Employees can be fired by their employers. Independent contractors cannot be fired as long as they produce a result that meets the specifications of their contract.

20. Right to Quit. Employees have the right to quit a job at any time without incurring liability. Independent contractors usually agree to carry out specific tasks or series of tasks and are responsible for completing those tasks satisfactorily, or are legally obligated to make good for failing to do so.

You can learn more visit www.irs.gov and click on Topic 762.

Start Early for Tax Season

Business owners are you getting ready for tax season? Believe it or not, it's not too early to start getting your financial records in order. In fact, wise business owners understand that waiting until year end to gather receipts for bookkeeping can be very costly in terms of accounting fees, missed tax deducations, and worse, late tax filing fees and penalties.

If you have not been keeping good records throughout the year, now is the time to get your books in order. Set aside some time each weekend over the next month to get caught up. Or, if the idea of recording hundreds of receipts sounds worse than having a tooth pulled send them out to your bookkeeper. This way you still have time before December 31 to ask questions that will help you save money and minimize income taxes.

Remember that building a lasting and profitable business requires you to be a good steward over your time, talent, and resources.

If you have questions concerning bookkeeping and taxes, visit my website at www.tbsusa.com and sign up for my newsletter. To receive a FREE copy of Quickbooks software for your business, send me an email. I only have a 80 copies remaining, so contact me soon. I'd be happy to send one out to you.

Blessings and success,

Benita Tyler, MBA
Accountant and QuickBooks Consultant
www.tbsusa.com

*Complimentary CD is valid while supplies last.

Field Trips To Inspire Your Inner Child

Wow! What a week it's been for me. We have had phenomenal weather here in Michigan over the past week and great indoor and outdoor adventures, too (thanks to my youngest son and his wonderful new school). I am grateful for the chance to break away from the home office and chaperone my children's field trips this week. We had a ball at the Ann Arbor Hands on Museum and Wiard's Apple Orchard. I even managed to get a few snapshots amongst all the fun. Oh, yeah. My son had a ball, too!

Be blessed!


Benita





Manzell is in awe of the giant bubble that he makes. He can't believe he's standing inside.





Anyone wanna ride in the ambulence? No worries. Manzell's not really driving. He has a few years left to go :^)







Looks like a great day for rock climbing.





... and a round of Putt-Putt golf,too. This is the life.

Don't you wish you were in kindergarten again?