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Brenton D. Soderstrum BrownWinick
666 Grand Avenue, Suite 2000Des Moines, IA 50309-2510
Telephone: 515-242-2474Facsimile: 515-323-8574
E-mail: [email protected]
Employee or Independent Contractor?
Advantage to an Independent Contractor:
• From an employment perspective:
1. No government mandated or employer provided benefits.
2. No workers’ compensation.
3. Independent contractors use their own equipment and facilities.
4. No unions.
• From a tax perspective:
1. No FICA or FUTA taxes.
2. Don’t withhold taxes.
3. Independent contractors pay SECA rather than FICA taxes.
4. No unemployment taxes.
Independent Contractor ChecklistPage 1 of 5
1. Profit or Loss;
2. Investment;
3. Work for more than one firm; and
4. Services offered to general public.
If “yes” to all four questions, probably an independent contractor
Page 2 of 5
5. Instructions
6. Training
7. Integration
8. Services rendered personally
9. Hiring assistants
Page 3 of 5
10. Continuing relationship
11. Work hours
12. Full-time work
13. Work done on premises
14. Sequence
Page 4 of 5
15. Reports
16. Pay schedules
17. Expenses
18. Tools and materials
Page 5 of 5
19. Right to fire
20. Worker’s right to quit
If answered “yes” to questions five through twenty, the worker is probably an employee.
Payroll Fraud Prevention ActApril 8, 2011
Would amend FLSA to include “non-employees”
1. Require employers to provide written notice to all employees and non-employees of their status and refer to Department of Labor website.
2. Impose $5,000 penalty for each misclassification.
3. Increase audits.
4. Increase referrals of violations.
Potential consequences of erroneous classification:
1. Liability for the federal or state taxes, interest, and penalties.
2. Individual and class-action lawsuits by allegedly misclassified workers.
3. Government, civil, and criminal actions.
4. Attorney fees, expert fees, and court costs.
5. Negative publicity.
Compliance Tips
1. Self audit.
2. Key factors.
3. Depending on results of audit, take steps.
Website: www.brownwinick.comToll Free Phone Number: 1-888-282-3515
OFFICE LOCATIONS:
666 Grand Avenue, Suite 2000Des Moines, Iowa 50309-2510
Telephone: (515) 242-2400Facsimile: (515) 283-0231
616 Franklin PlacePella, Iowa 50219
Telephone: (641) 628-4513Facsimile: (641) 628-8494
DISCLAIMER: No oral or written statement made by BrownWinick attorneys should be interpreted by the recipient as suggesting a need to obtain legal counsel from BrownWinick or any other firm, nor as suggesting a need to take legal action. Do not attempt to solve individual problems upon the basis of general information provided by any BrownWinick attorney, as slight changes in fact situations may cause a material change in legal result.
