Employee or Contractor?

[Limitless76]

Hello,

I have a question.

If i were to create a contract between myself and another individual for him/her to run my route, collect the money, and service the machines if the situation arises, would he/she be classified as an employee, or would he/she be an independent contractor?

What conditions would distinguish one from the other?

To go into further details, if the following were true:

~He/she receives a percentage of the gross sales rather than a set salary.

~He/she is only to run the route one to two times per week.

~He/she is to use his/her own vehicle.

~He/she signs a contract that acknowledges he/she is responsible for his/her own safety.

~He/she spends no more than 4 hours per week on these activities.

There are a few other conditions that i do not remember from the top of my head but i may add them in later.

I understand there are significant differences to how taxes are paid by the employer if they are an independent contractor, but it does not seem like a person described as such would be an employee.

In the case that he/she is an independent contractor, what information should i acquire from the individual? (I.e. social security, address, phone, etc.)

In the case that he/she is an employee, what steps are to be taken? (i.e. Paying FICA taxes, acquiring social security number, other tax information, etc.)

Please notify me if i am overlooking any other important aspects pertaining to this matter.

Thanks in advance.

[alyssamma]

If they have their own company/corp, then it is easy - you can treat them as a contractor. Otherwise, it is not so easy. Based on what you said above, I would consider them to be an emp, but the safest thing to do is to consult here: http://www.irs.gov/businesses/small/article/0,,id=99921,00.html

You can also look here: http://www.twc.state.tx.us/news/efte/appx_d_irs_ic_test.html

If they are a contractor, you need the EIN of their business. If they are an employee, there are a number of things you need. For the IRS an I9 and W2. Depending on your state you'll need other things. For example, in Ohio, there is a new hire form you must fill out. You also need to get set up to pay worker's compensation, unemployement (state and fed), etc.

Kevin

[mission vending]

I would agree with Kevin.

[Limitless76]

How about this?

Alot of ads can be found offering a variety of tasks on sites such as craigslist, e-lance, etc.

A one time lawn-mowing gig could turn into a weekly arrangement in which an individual is payed say $50 dollars a week.  Does the party receiving payment qualify as an employee, a contractor, or neither?  If they are an employee, Is it then, illegal for the paying end to neglect the actions you mentioned above?

If it is legal then what is different with the scenario below?

For example, someone is asked to collect money from a single machine, once a week for a 50% commission.  The machine averages $10 a week.  The individual receives $5 a week in compensation.

Both of the scenarios involve one party compensating another to complete a certain task, so what difference would it be if the amount was a little higher?

For example, the individual is to run a route with 10 machines, twice a week, all of which average $100 a week, at a 20% commission rate?

Would this person still be classified as either a contractor or employee?  If so, what differentiates this scenario from other scenarios such as the mawn lowing example above?

Thanks in advance.

[alyssamma]

In your lawn mowing example, you are paying someone to do a job that isn't your business. If you had a lawn mowing business and paid someone to do it, they would be your emp, not a contractor.

You have a vending business. People you get to help you do things directly realated to that business are, in general, employees. Someone like an accountant would not be because that is not directly related to vending.

Read the links I gave you - it should explain this more to you.

Kevin

[mission vending]

You seem to be really intent on trying to game the system to avoid paying payroll taxes and avoiding the other responsibilities that come with being an employer. Sure you can do it, I know some that do, and get away with it for years and years.

The problem will arise when one of you employees gets mad at you for some reason or maybe gets hurt and tries to file a worker's comp or unemployment claim, or maybe for unpaid time. Chances are very likely you will lose that battle and be subject to paying that taxes you should have withheld, your matching portion, penalties, interest and possible audit and legal fees and the hassles that come with it.

So the rhetorical question for you to ask yourself is this.....

Is the cost benefit worth the risk of having to deal with all the crap that will come my way if I avoid paying my payroll taxes?

For me it's not worth it. Its your call.