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Employee or independent contractor?
Are the people who work in your photo business really independent contractors? Or are they employees? The common-sense answer may be wrong. Use this checklist to see how the government classifies your workers.
The checklist summarizes the tests found in Publication 15a guidelines published by the Internal Revenue Service, which issues rules about federal taxes and withholding. Most of the states also use a very similar checklist in determining worker status for state taxes.
If you answer “yes” to any one of the following questions, your worker is an employee, not an independent contractor.
Does the principal provide instructions to the worker about when, where, and how work is to be performed?
Does the principal provide training to the worker?
Does the principal set the work hours and schedule?
Is the worker paid by the hour, week, biweekly, or month?
Does the principal hire, supervise, and pay assistance to the worker?
Is there a continuing relationship between the principal and the worker?
Are the services provided by the worker integrated into the principal’s business operations?
Does the worker substantially devote time to the business of the principal?
Is the work performed on the principal’s premises?
Is the worker required to perform the services in an order set by the principal?
Is the worker required to submit reports to the principal?
Does the principal have the right to discharge the worker at will?
Can the worker terminate his/her relationship with the principal at any time without incurring liability to the principal?
Does the principal pay the business or traveling expenses of the worker?
Does the principal furnish tools, materials and equipment?
Caution: If you incorrectly classify an employee as an independent contractor, you can be held liable for both the employee and employer taxes, plus a penalty. Generally, the safe course is to treat workers as employees. However, you can ask the IRS to make a determination for your specific circumstances by filing Form SS-8.
ASMP members: check the member benefits page for info about products and services that can help you handle payments and taxes for your employees and contractors. (Member password required.)