Many small businesses choose to hire “independent contractors” rather than go down the complex path of hiring employees. You need to be aware of both the tax and legal issues around the differences between the two. The IRS has very specific guidance as to what defines an “independent contractor” and could penalize you with back payroll taxes and penalties if you improperly categorize a worker as an independent contractor instead of an employee. Independent contractors typically have control over how and when they perform the work. The IRS Publication 15-A: Employer’s Supplemental Tax Guide can provide you more information that will help you ensure your “independent contractor” actually is one. From a legal perspective, the risk you undertake in bringing on an independent contractor is different than the risk associated with hiring an employee. Your contracts and possibly your company’s policy manual must reflect the specific risks associated with bringing on each. If you have anyone working for your business, you need a description of policies and procedures. How these rules are applied to various types of workers may be the key to defending someone’s role as an independent contractor.

Author: Michelle Bomberger, King County Business Lawyer

X