Employee vs Independent Contractor

IRS Announces Worker Classification Audit

The IRS recently announced that it will conduct 6,000 audits focused on whether businesses are properly classifying their workers as employees or independent contractors.  Employers should take the time to review their existing arrangements with independent contractors.  If an employer has classified an employee as an independent contractor and has no reasonable basis for doing so, they may be held liable for employment taxes for that worker.  In addition to this tax and potential penalties for employers who misclassify workers, employers may find that workers reclassified from independent contractor to employee are now seeking to claim benefits from the employer, such as health benefits and matching 401(k) contributions.

As a general rule, an individual is an independent contractor if the employer for whom the services are performed, has the right to control or direct only the result of the work and not the means and methods of accomplishing the result.

Technically speaking, the classification determination is made under a common-law test based on all the facts and circumstances.  Common law rules include three characteristics, which are used by the IRS to determine the relationship between businesses and workers: behavioral control, financial control, and the type of relationship.

If, after reviewing the three categories of evidence, it is still unclear whether a worker is an employee or an independent contractor, either the business or the worker may file Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding, with the IRS.  The IRS will review the facts and circumstances and determine the worker’s status.  This process can take up to six months; however, businesses that continually hire the same types of workers to perform particular services may want to consider filing the Form SS-8.

This is a major topic affecting entrepreneurs, start-ups, and small businesses.  Steiner Business Solutions will be addressing this in an upcoming Business Seminar.  Make sure you go to our website and look for the date.  You can register for any of our free seminars at www.steinerbusinesssolutions.com.

Employee vs Owner Mentality

Over the last several years I’ve met many business owners – single operators and partners within a group.  What I’ve noticed is that some owners lack the right mentality to own (and manage) a business.  I call it the “owner mentality”.  Instead,  they still hold onto an “employee mentality” – a mentality developed over many years while working for others OR relying too heavily on other business partners to make things happen.  When you have an employee mentality, you expect things to change or get better, but you expect it will happen somehow naturally- or you depend on someone else to make it happen.  That’s not the mentality of an entrepreneur or someone who’s successful.

If you’re in business for yourself, you need an owner mentality.  With this mentality, you know it’s up to you (and only you at times) to make it happen.  Don’t look for others to carry you or bail you out.  I can personally speak to this topic because I’ve had to wear many hats in my company.  It’s my name on the door.  I have no formal training in sales & marketing.  I’m not the most outgoing person, so networking doesn’t come naturally to me.  But I know that if I’m going to make my company successful (especially in one of the worst economies of all time), I need to step out of my comfort zone and do the work.

What’s your mentality?  Are you waiting for the phone to ring? Or…Are you making the phone ring!