5 Star Payroll - Employer/Contractor Differences

With the IRS trying to close the “tax gap” and recover lost revenue, it has identified improper worker classification as one of its top initiatives. When an employer improperly treats a worker as an independent contractor-that is, the work relationship does not satisfy the definition of “independent contractor”-the federal government loses tax revenue. The employer may be fined for this incorrect classification. Most workers can be classified as either employees or independent contractors by using the “common law test.” Under the common law test, a worker is a common law employee if the employer has the right to control what work will be done and how that work will be done. However, if an individual is subject to the control of the company only as to what results are to be accomplished, and not as to the details by which those results are accomplished, the individual is not an employee. Please use the table below to help you determine the difference between Employee or Independent Contractor are shown in the link below. CLICK HERE to print the table below.

Should you determine that you are an Independent Contractor, you MUST complete Form W-9. CLICK HERE to print the W-9 Form.

Employee	Independent Contractor
Required to comply with employer's instructions about when, where and how to work.	Sets own hours; determines own sequence of work.
Works exclusively for the employer.	Can work for multiple employers; services available to the public.
Hired by the employer.	Is self-employed
Subject to dismissal; can quit without liability.	A contract governs how the relationship can be served.
Has a continuing relationship with the employer.	Works by the job.
Work done personally.	Permitted to employ assistants.
Performs services under the company's name.	Performs services under the worker's business name.
Paid salary: reimbursed for expenses; participates in company's fringe benifits programs.	Payment by the job; opportunity for profit and loss.
Furnished tools, equipment, materials, and training.	Furnishes own tools, equipment, and training; substantial investment by worker.
If an outside salesperson: Company provides leads, sets terms and conditions of the sale, assigns a territory, and controls the sales process.	Controls the sales process and terms.