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Independent Contractor vs. Employee

Businesses today often hire independent contractors over employees, however, the distinction is often blurred and liability may result not only to a third party but also to the Internal Revenue Service.  In the event the Internal Revenue Service determines a worker is an employee and not an independent contractor, an employer may be charged with back payroll taxes, interest and penalties.

Once your company determines it will hire independent contractors, certain steps should be taken.  It should be clear on the job application that the position is for an independent contractor.  Next, all contracts should be in writing between the employer and the independent contractor.  The contract should specify that the relationship between the parties is that of an independent contractor.  Next, the relationship between the company and the independent contractor should be at arms length.  The worker should be paid by the job rather than hourly or weekly.

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