Puzzled About Rules for Hiring Independent Contractors (insurance, accountant, taxes)

[thrillobyte]

We've read how many employers are only hiring people on an independent contractor basis now in order to avoid having to pay benefits and SS but I thought the rules for qualifying to be an IC we were very stringent, chief among them that the IC does not have any set hours to get the job done, just that he have the work completed by a certain date. But obviously these people are coming into work 9-5 and if they don't they get canned. So how are employers skirting this rule?

[Philip T]

Originally Posted by thrillobyte

We've read how many employers are only hiring people on an independent contractor basis now in order to avoid having to pay benefits and SS but I thought the rules for qualifying to be an IC we were very stringent, chief among them that the IC does not have any set hours to get the job done, just that he have the work completed by a certain date. But obviously these people are coming into work 9-5 and if they don't they get canned. So how are employers skirting this rule?

It is simple.

Most American "business" people are really, really, stupid.

Just terminally stupid.

But if you wish to see the real IRS guidelines, look at IRS Form SS-8

http://www.irs.gov/pub/irs-pdf/fss8.pdf

Independent Contractor (Self-Employed) or Employee?

[texdav]

They set the time in the contract by hours needed to complete the job. The contract can place penalties for not meeting that date. It requires bascailly keeping a scheule to get the job done on time . There are such allowance such as wether etc but even then often they have to request a variance o the contract to avoid going over and the pentalies. Its nothng like them doing theirself with thier own empolyeees. If they don't preform as in contrct they don't get scheduled payments and can be kicked off the job also.

[sunsprit]

False premise, thrillobyte ... that "many employers" are hiring only on an IC basis.

To qualify as an IC, the services must truly be on an "independent" basis. If you've got to show up to work at a given office/worksite to perform your tasks and the employer provides the substantial means of creating work product (tools, computers, materials ... whatever it takes to create a work product in your profession, trade, or craft) ... you're not an independent contractor. Especially if you need a business license to perform your work, you'd better have one and your own place of business instead of doing your work under the license/business insurance/business workplace of somebody else.

The feds have been cracking down on the IC requirements for quite a few years because a lot of employers were trying to skirt the rules and avoid collecting/reporting tax/WC/UI/benefits packages and other costs of employees. I think it's safer to say that most work situations didn't qualify as IC, and the feds went after the employers for their unpaid contributions to FICA and witholding income taxes.

[darstar]

For the most part , having your own tools to accomplish the job was always the basic test. And I mean something more than a hammer. There are contracts that in the past were " legal" but today are not , due to the crack-down , and to several ruling imposed in recent years.
I use to hire all my people as Independent Contractors, until one day my accountant said...no more , the game has changed..... The other problem we had back then was many Independent Contractors would fail to pay their taxes, and it would come back to bite not only them , but us as well. Eventually we had to let them go , as the battle with the IRS was one we did not want to fight. It was just easier to make them employees.

[thrillobyte]

Thanks very much for the replies. Very educational. I was contemplating hiring a companion for my elderly mother and wanted to hire her an IC but it sounds like I'd have an impossible job trying to convince the IRS the companion was working on a legitimate IC basis.