Independent Contractor vs. Employee
Who is an employer?
An employer is any person, business, or
organization for which an individual performs any service as an
employee. This includes religious, educational, charitable, and
social organizations or societies, even if the organizations are exempt
from paying income taxes.
Who is an employee?
Generally, an employee is any individual
who performs services for you, when you have the right to control what
will be done and how it will be done. This is true even when you
choose not to exercise your control over the employee and allow the
employee freedom of action. It is also true regardless of how
payments are measured or paid or whether the employee works full-time or
part-time.
If an employer/employee relationship
exists, it does not matter what the relationship is called.
Generally, if someone performs services for you, he is an employee
unless he is in business for himself and offers the same service to
others.
What's the difference between an
employee and an independent contractor?
There are many standards to determine
whether an individual performing services for you is an employee or a
contractor. Some of the common characteristics are:
| Employee
|
Independent
Contractor |
| Works set hours |
Sets own hours |
| An ongoing relationship |
Relationship
lasts a limited time |
| Paid by hour, week, or month |
Paid by the job
performed |
| Reimbursed for business
expenses |
Responsible for
incidental expenses |
| Facilities and tools
furnished by employer |
Has own
facilities and tools
|
| Works for one firm |
May work for
several firms at once |
| Must render services
personally |
Can subcontract
services to another |
| Regular reports are required |
Not required to
account for actions |
| Does not solicit for work |
Solicits for work
through advertising |
Can be discharged
|
Cannot be
terminated except for breach of contract |
Can quit
|
Must complete
contract or be responsible for failure to do so |
| No risk of loss or
opportunity for profit |
Has risk of loss
and opportunity for profits |
FORMS:
For more information on
how to determine whether someone providing services is an independent
contractor or an employee, see IRS Publication 15, Circular E,
Employer's Tax Guide and Publication 15-A, Employer's
Supplemental Tax Guide.
Source: A Guide to Idaho Income
Tax Withholding; Idaho State Tax Commission.
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