Business owners often struggle with whether to hire employees, or to use outside contractors. And these days many residents in San Francisco and throughout the Bay Area, especially in Silicon Valley towns like Palo Alto or Sunnyvale, work as independent contractors – long term. Are they truly independent contractors or workers? The IRS has many rules and regulations on this, and some tests. Our monthly client newsletter discusses those in detail, generally –
1) The IRS is aware that businesses “like” independent contractors because this avoids many taxes such as Social Security – however, just because you “like” having someone classified as an independent contractor, doesn’t mean this will pass muster with the IRS.
2) Generally, if you give orders and instructions to the person, especially when and where to report to work, if this is an on-going relationship, and if you are the only source of income / time for the person… they will be considered an employee. No one can say for certain as situations vary… but if it looks and acts like an employee, generally it’s an employee.
If you’re not sure, or you are sure (and you’re doing it wrong), please call us… we can discuss the situation with you, as well as many advantageous and legal things you can do as an employer or an employee to minimize taxes. Our goal – always – is to stay within the limits of the law, but get you every single tax savings you can. There’s a lot we can do, if we work together! We are specialists in corporate tax, so if you are an employer, we are especially keen to help!