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Employee vs. Independent Contractor

Today we will take a brief look at the old question: Are they an employee or an independent contractor?

This question continues to be a priority for the IRS. There is a form (SS-8) that an employer or employee can fill out and file with the IRS to determine the status of a worker for purposes of Federal Employment Taxes and Income Tax Withholding. There is no fee for requesting a Form SS-8 determination letter.

The IRS recently released new draft instructions for this form. They added the following statement to the instructions:

Generally, under the common law rules a worker is an employee if the firm has the right to control what will be done and how it will be done.

It does not matter what title you give to a worker. It also doesn't matter whether they work full time or part time. That new statement could be very important as it clearly addresses the IRS’s position.

Disclaimer: The items included in the Tax Tip Tuesday Video Blog are informational only and are not meant as tax advice. Consult with your tax advisor to determine how any item applies to your situation. IRS Circular 230 disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advise contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein

Previous Editions of Tax Tip Tuesday
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