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Employee or Independent Contractor-What's the Difference?
by Bob Goffredo

The proper classification of employee or independent con- tractor is important. What are the pros and cons of each? How do you know which is which?

To help determine the status of an individual, the IRS has established 20 factors it reviews to help determine the proper classification. I will highlight several of the items that may be of concern.

	Instructions to a worker-A worker who is subject to instructions about when, where and how to work is usually an employee.
	Training-An employee is more likely to be subject to training than an independent contractor.
	Requirements that services be personally per- formed-Greater flexibility given to the worker to designate who may perform services favors an independent contractor classification.
	Hiring, supervising and paying for a worker's assistants -If the business provides assistants to the worker, as opposed to the worker providing his or her own assistants, this may indicate that the worker is an employee.
	Requirements of full-time work-independent con- tractors, unlike employees, do not normally work full- time for one business and are free to work when and for whom they choose.
	Paying workers by hour, week or month- Employees are normally paid hourly, weekly or monthly, while independent contractors are usually paid by the job or on a straight commission basis.
	Furnishing workers' tools and materials- Employees are normally provided necessary work tools and materials. Independent contractors tend to furnish their own.
	Working for more than one business at a time- Employees usually work for only one company, while independent contractors frequently work for more than one business.
	Firm's right to discharge workers-An employer exercises control over its employees through the threat of dismissal, while independent contractors normally cannot be dismissed as long as they meet their contractual obligations.
	Worker's right to terminate relationship- Employees are usually entitled to quit at their leisure, while independent contractors generally must fulfill contractual obligations.

While I have only listed 10 items of 20, there is more information available on the Internet by going to http:llwww .irs. ustreas .gov Ip lainlbus-info/index .html. This information should also be available from your accounting service or even some software.