Understanding how to classify employees
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From The IRS
If you classify an employee as an independent contractor and you have no reasonable basis for doing so, you may be held liable for employment taxes for that worker. See Internal Revenue Code section 3509 for additional information. These resources can help you to ensure correct classification.
Worker Classification Webcast :
A critical issue for all businesses is properly classifying workers as employees or independent contractors. The IRS’s archived Tax Talk Today Webcast, “What’s Hot in Employment Taxes: Independent Contractor or Employee?”, focuses exclusively on worker classification issues.
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Tax Topic 762 Basic Information:
To determine whether a worker is an independent contractor or an employee, you must examine the relationship between the worker and the business. All evidence of control and independence in this relationship should be considered. The facts that provide this evidence fall into three categories Behavioral Control, Financial Control, and the Type of Relationship itself.
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IRS Internal Training: Employee/Independent Contractor (PDF):
This manual provides you with the tools to make correct determinations of worker classifications. It discusses facts that may indicate the existence of an independent contractor or an employer-employee relationship. This training manual is a guide and is not legally binding. If you would like the IRS to make the determination of worker status, please file IRS Form SS-8.
- Form SS-8 (PDF):
Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding
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Publication 15-A :
The Employer's Supplemental Tax Guide has detailed guidance including information for specific industries.
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Publication 15-B:
The Employer’s Tax Guide to Fringe Benefits supplements Circular E (Pub. 15), Employer's Tax Guide, and Publication 15-A, Employer's Supplemental Tax Guide. It contains specialized and detailed information on the employment tax treatment of fringe benefits.
- Businesses with Employees
- Hiring Employees
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Online Classroom, Lesson 6 - What you need to know about federal taxes when hiring employees/contractors
- Distinguishing Between Self-Employed Individuals and Independent Contractors
Definitions
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