Who are employees ?
- Payroll taxes and other issues
- Verifying employee SSNs
- What constitutes wages ?
- Who are employees ?
- 20 factors in determining employee or independent contractor status
- misclassified employees
- Updated views of the IRS 20 factors
- IRS web – Withholding for foreign athletes and entertainers
- Statutory employees
- Government employees
- Agricultural employees
- Ministers and religious organizations
- Leased employees and PEO organizations
- Family members
- Federal Insurance Contributions Act (FICA)
- Federal Unemployment Tax Act (FUTA)
- Self-Employment Tax (SECA)
- Deposit deadlines
- Trust fund recovery penalty, IRC § 6672
Many employers classify workers as independent contractors to avoid:
- the minimum wage or overtime requirements of the Fair Labor Standards Act
- IRS' and state requirements for employee benefits and payroll taxes (including withholding)
- laws governing discrimination in the workplace
- worker's compensation insurance
Persons classed as independent contractors have sued employers seeking employee benefits. E.g., Microsoft settled a class-action filed on behalf of thousands of contingent workers for around $100 million.
Who are employees ?
- Common law employees [20 factors used by the IRS to determine status under R.R. 87-41 ]
- Corporate officers are deemed to be employees for purposes of FICA and FUTA
- Statutory Employees
- "Leased" employees
See IRS web site on information for businesses with employees and who is an employee 10/10/07
Under § 530(a) of the Revenue Act of 1978, as amended, unless there is NOT a reasonable basis, "employers" can treat persons as NOT an employee under certain circumstances.
Rev. Rule. 87-41, 1987 CB 296 – "Guidelines for classification as employees or independent contractors" – COMMON LAW RULES generally determine if the employer/employee relationship exists [Guides for determining that status are found in the following three substantially similar sections of the Employment Tax Regulations: § 31.3121(d)-l(c); § 31.3306(I)-1; and § 31.3401(c)-l.]
- Taxes covered by the Revenue Rule:
- The person for whom the services are performed has the RIGHT to CONTROL and direct the individual performing the services as to WHAT shall be done [WHEN, WHERE,] AND HOW it shall be done. ACTUAL control is NOT required.
- Conversely, individuals (such as physicians, lawyers, dentists, contractors, and subcontractors) who follow an INDEPENDENT TRADE, BUSINESS, OR PROFESSION, IN WHICH THEY OFFER THEIR SERVICES TO THE PUBLIC, generally are NOT employees.
- Designation or description of the relationship by the parties is immaterial [partner, co adventurer, agent, independent contractor, or the like]
- Whether the Firm or the Client qualifies for employment tax relief under § 530(a) of the 1978 Act; and
- Whether any such relief is denied the Firm under § 530(d) of the 1978 Act (added by § 1706 of the 1986 Act).