Employee vs. Independent Contractor
NOTE: This information is furnished with the understanding that Textile Management Systems, Inc.and RollMaster Software, as the publisher of this article, is not engaged in rendering legal, accounting, or other professional services. If legal advice or other expert service is required, the service of a competent professional should be sought.
The RollMaster Web Calendar attempts to address the type of factors that may show the type of relationship between parties. These factors can include, but are not limited to: written contracts describing the relationship the parties intended to create and how the parties actually work together and whether the business provides the worker with employee type benefits, such as insurance, a pension plan, vacation pay, or sick pay. Most independent contractors bid on jobs/projects, provide insurance, tools and special skills, train internally, create company invoices showing entity name and tax id for services rendered. The RollMaster Web Calendar attempts to address these issues for the flooring business.
Flooring business owners may not understand when to classify an individual as an employee versus an independent contractor. Proper classification of a worker as an independent contractor may save a company money and benefits, such as group health and workers’ compensation insurance, as well as social security and unemployment insurance taxes. In most cases, the only tax form employers have to complete is a Form 1099-MISC at the end of the tax year for workers classified as independent contractors.
The RollMaster Web Calendar professionalizes your installers and can clarify whether you classify installers as independent or employee. Mistakenly classifying an employee as an independent contractor can result in significant fines and penalties. The IRS lists 20 factors, all intended to determine degree of control
over a worker- See this IRS article
. The list, sometimes called the “20-Factor Test”, is still used as an analytical tool, although some of the factors are no longer as relevant as they once were. I have read reports where agents are directed to focus on the overall situation rather than to emphasize one or two of the 20 factors. The determination of whether a worker is an employee or an independent contractor is based on common law rules, which look at the relationship between the worker and the business, taking into consideration all evidence of control and independence. The determination of worker status depends on several factors, including: the extent to which the person receiving the services has the right to direct and control the service provider on what is to be done and how it is to be done.
It is important for flooring businesses to understand the distinction between employee and independent contractor. Correctly classifying workers before they perform services can save a business confusion, difficulties, and possible fines down the road. Check with an accountant or attorney for professional advice on this subject.