If the way a worker functions is actually like an employee, that distinction needs to be declared; this directly affects a company’s claimable payroll deductions.
To be clear, “Independent Contractors” should have markedly different relationships with the companies they provide services to versus general employees. There should be no confusion, gray area, or blurred lines.
The Internal Revenue Service has no less than 15 criteria that distinguishes employees from independent contractors and expects your taxes to be paid accordingly. According to the IRS, independent contractors are workers who control their own schedule, purchase their own work supplies and tools, maintain multiple clients, and they personally manage how a project or service gets completed for the hiring entity. Independent contractors should be able to come and go as they please without fear of reprisal or firing.
Further, independent contractors are generally paid via separate payment methods and schedules than individuals compensated through a company’s payroll system. Misclassification of workers as independent contractors can trigger audits that revise a worker’s status over the last ten years, which can suddenly require commensurate payroll taxes to be due immediately.