08.23.07
Using Independent Contractors
For small businesses, Independent Contractors (ICs) can prove to be a vital resource. You receive expertise in a particular area at a set contracted fee without the worries of dealing with employees issues and such things as overtime, sick time, payroll taxes, etc. When the job is done, you both move on.Uncle Sam is always interested in businesses that use ICs. Generally, you should not encounter any problems in terms of tax related issues IF you follow applicable IRS guidelines related to ICs. Also remember:
- You can control the work product standard, but not the way in which the work is done. The IC controls the when, where, or how to work.
- Always try to have a written contract clearly outlining that you have an IC relationship.
- Try to have the IC work off-premises, using their own resources and tools.
- Make sure you have a meeting of the minds with your IC in the sense that they understand they are an IC and not an employee. Maintain that relationship even if you decide to utilize their services for more than one project.
