My initial experience with being an independent contractor happened some 25 + years ago in construction. Remember what it was like? Any carpenter took any job that was available because recession was knocking the stuffing out of building, although not as bad I think as lately. Unless you had a union job (and those came few and far between), you worked for anybody who would hire you and under almost any circumstances. Everybody knew that independent contractors were hired more often than not to avoid unemployment taxes and workmen’s comp insurance. It looks like there is a lot of that again as some people on the Intuit Community have pointed out (Rustler and Michelle Long, for instance).
The red flag is this article from CNN Money. The gears of government grind slowly but exceedingly fine (trite, but accurate). The IRS figures to gain some $7 billion over the next 10 years by actively and randomly auditing businesses for misuse of independent contractors vs. employees.
Don’t be on the wrong side of this chasm as a business owner. This article tells you, among other things, to file an SS-8 IRS form to get an IRS determination. Whatever you do, don’t depend on the advice of an taxation amateur like myself. Get professional assistance from an accredited tax expert and don’t forget your state agencies or other governmental agencies such as unemployment insurance in your evaluation process. Be proactive before you have to defend yourself for what is an essentially legitimate business strategy.
Work is hard to come by, but don’t encourage the abuse of the independent contractor model by accepting work you know really should be done by an employee. When the work starts to look like a job complete with scheduling requirements and stipulations how the job is to be done, better give it a second look! Being an independent contractor can be an excellent choice for the right person (and the right business that needs to outsource the work). It’s not an excellent choice for trying to shuck and jive taxation and labor laws.
