Status Quotient

Planning Tips

Businesses and tax-exempt organizations have three lines of defense. Be prepared to use any one of the following against the IRS challenge if you hire an independent contractor:

  • Show that you don't have the authority to control how the work is done;

  • Show that you don't furnish the worker's equipment or supplies; that you don't set the worker's hours nor pay by the time spent; that the worker stands to make a profit or loss; and that there is no continuing relationship with the worker;

  • Show that you have not treated this type of worker as an employee on tax reports; have filed the IRS form 1099 annually, when required, for payments to the worker; and have a reasonable basis considering the worker as an independent contractor.

Finally, for additional documentation on this issue, contact the IRS at (800) 829-3676 to order Publication 15, Employer's Tax Guide, which includes detailed information on this topic.

Like this article? Get this issue right now on iPad, Nook or Kindle Fire.

This article was originally published in the May 1997 print edition of Entrepreneur with the headline: Status Quotient.

Loading the player ...

Mike Rowe From 'Dirty Jobs': Don't Follow Your Passion, Live It

Ads by Google

Share Your Thoughts

Connect with Entrepreneur

Most Shared Stories