Tax Information for Small Businesses
Construction - Independent Contractor OR Employee?
Worker Classification (Who are employees?)
4 Classification of Workers
•
Independent Contractors
• Common-law Employees
• Statutory Employees
• Statutory Nonemployees
Common-Law Employees
• An individual who performs services for you who is subject to your control
regarding what will be done AND how it will be done.
•
It does not matter that you give the employee freedom of action; what matters is
that you have the RIGHT TO CONTROL the details of how the services are
performed.
Corporate Officers
• Generally, considered employees of the corporation
• Not considered an employee if:
1. The officer does not perform any services or performs only minor
services.
2. The officer is not entitled to receive, directly or indirectly, any
remuneration.
Independent Contractor
• An individual who performs services for you but is NOT under your DIRECT
control.
• You the contractor have the right to control and direct ONLY the result of the
work and not the means and methods of accomplishing the result.
Statutory Employees
•
Independent contractors under common law, which are treated as employees by
statute for Social Security and Medicare taxes
• Four categories
•
Income tax is not withheld from statutory employees
• FUTA is paid on Category 1 & 4 of following list
1. Agent (commission) drivers who deliver food, beverages (other than
milk), laundry or dry cleaning for someone else
2. Full-time life insurance salespersons
3. Home workers, who work by guideline of the person for whom the work
is done with materials furnished by and returned to that person or to
someone that person designates
4. Traveling or city salesperson (other than an agent-driver or commission
driver) who works full-time (except for sideline sales activities) for ONE
firm or person getting orders from customers
Statutory Nonemployees
• Direct Sellers
• Licensed Real Esta