Recent presentation to small business owners and entrepreneurs on current IRS and TWC definitions of employees and contractors

1. Presented by Caroline Valentine ValentineHR www.valentinehr.com Caroline@valentineandassociates.com 512 659 9848 Consultant, Contractor or Employee

3. Knowledge of potential costs to your business

5. Common Law Test Having the right to control or direct only the RESULT of the work done and not the MEANS AND METHODS of accomplishing the result.

7. Common law employee

8. Statutory employee

9. Statutory nonemployeeIRS Definitions

10. Independent Contractor The general rule is that an individual is an independent contractor if you, the person or company for whom the services are performed, have the right to control or direct only the result of the work and not the means and methods of accomplishing the result.

11. Common Law Employee Under common law rules, anyone who performs services for you is an employee if you have the right to control what will be done and how it will be done.

12. Common Law Employee This is so even when you give the employee freedom of action. What matters is that you have the right to control the details of how the services are performed.

14. Financial control

16. What tools or equipment

17. What workers to hire or to assist with the work

18. Where to purchase supplies and services

19. What work must be performed by an individual

20. What order or sequenceTraining

22. of the worker’s investment

23. to which the worker makes his/her services available to the relevant market

24. to which the worker can realize profit or lossHow the business pays the worker

26. Provide benefits – insurance, vacation, sick time, retirement

27. Permanency of relationship

29. Life insurance sales agent

30. Home worker assembling goods

32. Work performed under a written contract providing they will not be treated as employees for tax purposes

34. Companion sitters – self-employed

35. Direct sellers

36. Selling consumer products in home or business other than retail location

37. Selling consumer products on buy-sell basis for resale

39. Part of motion picture or audiovisual work

40. Translation

41. Supplementary work

42. Compilation

43. Instructional text

44. Test and/or answer material for test

46. Checklist for Comparative Approach http://www.texasworkforce.org/ui/tax/forms/c8.pdf TWC Handout

48. Social Security and Medicare (FICA)

49. Federal Unemployment (FUTA)

50. State Unemployment (SUTA or TUCA)Worker’s Compensation Insurance

51. Non Profit Organizations Many nonprofit organizations are exempt from paying federal income tax but still must withhold federal income tax from pay or wages of employees. There are special rules for FICA and FUTA that apply to those wages. Please see Publication 15A of IRS for details. Exemption is not always the case with State of Texas, check TWC website under Unemployment Insurance Law –Employer Responsibility and Coverage Issues

53. Willful evasive action can result in felony and fines up to $500,000 (and back taxes)

55. Resolution Reclassify correctly If you have treated employees as nonemployees, make a “good faith” effort to resolved it with the IRS. See section 3509 of IRS Code for details. TWC – see Unemployment tax rates

57. Use a Checklist

58. Contain your Cost Wrap Up