The information on this page is for educational purposes only. Nathan S. Gibson does not recommend or endorse these services but provides information about them for informational purposes only.
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“Independent Contractor Tax Advisors is a licensed CPA firm that provides accounting services and tax advice for contractors, consultants and other self-employed clients across the U.S. For a low, fixed monthly cost, we use sophisticated strategies to legally minimize the taxes of independent contractors and freelancers while improving bookkeeping, streamlining payroll, and reducing IRS audit risk. Our clients love us because we simplify their lives and put more money in their pockets. Period.”
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Contact Robert Oliveros, Sales Underwriter, Small Business Alliance Center, 3600 Wiseman Blvd, San Antonio, TX 78251:
phone: 210-451-6631; email: [email protected]
“The tax law covering independent contractors is not simple. There are numerous factors that impacts the way the IRS will view your case concerning independent contractor/employee relationship. As you know, you must withhold income taxes, withhold and pay Social Security and Medicare taxes, and pay unemployment tax on wages paid to an employee. You do not generally have to withhold or pay any taxes on payments to independent contractors. In determining whether the person providing service is an employee or an independent contractor, all information that provides evidence of the degree of control and independence must be considered….If you have any questions concerning your particular case, please do not hesitate to contact the Houston-based tax attorneys at Hammond Law Group, PLLC for a free consultation today.”
Papers and Research
- The Economics of Independent Contractors — Charles Diamond, Ph.D., Peter Cahill, and William Crowley of Charles River Associates conclude
It would appear that independent contractors are able to be at least as well-off financially as their employee counterparts. All employer-provided benefits are paid for by employees themselves either directly or in reduced wages. The overtime issue is similar. Employers forced to pay hourly rates plus overtime instead of salaries will adjust pay rates so that compensation is the same. Meanwhile, independent contractors enjoy the ability to exercise greater control over their work arrangements.
- Special Report States Enact Legislation Having a Mixed Effect on Independent Contractors (mid-year 2016) by the Coalition to Promote Independent Contractors —
Continuing the trend of recent years, independent-contractor status has remained a focus of state lawmakers during the first half of 2016. This continued attention has resulted in several recently enacted bills that will have a mixed effect on independent contractors and their clients. Thus far this year, generally helpful bills have been enacted that clarify the independent contractor status of workers in the on-demand/sharing economy and define important terms. At the same time, some states are moving in the opposite direction. A potentially harmful bill was enacted that urges a study to investigate worker misclassification, and it is uncertain how other new laws will affect the determination of an individual’s status.
- The information on this page is meant to assist in a general understanding of independent contractors. It is not to be regarded as legal advice or tax advice. Individuals or companies should consult with qualified tax or legal professionals.
- Sargent v. Commissioner, 929 F.2nd 1252 (8th Cir. 1991) — the Eight Circuit Court of Appeals addresses the case where professional hockey players for the Minnesota North Stars who formed personal service corporations and signed employment agreements with them. The court said “the service-provider must be..an employee of the corporation whom the corporation has the right to direct or control in some meaningful sense” and “there must exist between the corporation and the entity (Club) using the services a contract or similar indicium recognizing the corporation’s controlling position.” The court concluded “Appellants in this case entered into bona fide arms length agreements with their respective PSCs. For this reason, each is considered to be an employee of that PSC, and not an employee of the North Stars Hockey Club.”
- Leavell v. Commissioner, 104 T.C. 140 (1995) — the Tax Court reviewed a case where a professional basketball player created a personal services corporation similar to the situation in Sargent v. Commissioner. The Tax Court stated that a “contract purporting to create an employer-employee relationship will not control where the common law factors (as applied to the fats and circumstances) establish that the relationship does not exist….We will continue to examine all the facts and circumstances in order to determine the reality of who has control over the manner and means by which the individual service provider delivers the service.”
- The court went on to say “After carefully reconsidering our position in Sargent v. Commissioner, supra, in light of its reversal by the Court of Appeals for the Eighth Circuit, we conclude that our approach in Sargent was correct.”
- In analyzing the facts, the court concluded that the personal service corporation’s rights to control the manner and means by which the player provided the services were “at best illusory.” The Uniform Player Contract, required by the National Basketball Association (NBA), gave the team a degree of control over the player that “transcends the control most employers have over their employees.” The contract was signed by the personal services corporation AND was guaranteed by the player. without the player’s guarantee, the team would not have signed the contract with the personal services corporation.
- Arnold v. Commission, T.C. Memo. 2007-168, Docket No. 16573-05, filed June 27, 2007 (Arnold v. Commissioner)
- The tax court reviewed the situation where a real estate broker and tax professional established S corporations and assigned their income to the corporations. The tax court said:
- A fundamental principle of tax law is that income is taxed to the person who earns it. Commissioner v. Culbertson, 337 U.S. 733, 739 (1949); Lucas v. Earl, 281 U.S. 111, 114 (1930); Johnston v. Commissioner, T.C. Memo. 2000-315. The existence of a validly organized and operated corporation does not preclude taxation of income to the service provider instead of the corporation. Wilson v. United States, 530 F.2d 772, 777-778 (8th Cir. 1976); Haag v. Commissioner, 88 T.C. 604, 610-611 (1987), affd. without published opinion 855 F.2d 855 (8th Cir. 1988); see also Commissioner v. Culbertson, supra at 739-740. Deciding whether the corporation or the service provider earned the income requires that we decide whether the corporation or its service-performing agent or shareholder controls the earning of the income. Johnson v. Commissioner, 78 T.C. 882, 891 (1982) (and cases cited thereat), affd. without published opinion 734 F.2d 20 (9th Cir. 1984).
- A corporation earns the income if: (a) The service provider is an employee of a corporation which has the right to direct or control that employee in some meaningful sense; and (b) there exists a contract or similar arrangement between the corporation and the person or entity using the services which recognizes the corporation’s right to direct or control the work of the service provider. Haag v. Commissioner, supra at 611; Johnson v. Commissioner, supra at 891; see also Leavell v. Commissioner, 104 T.C. 140, 151-152 (1995).
- The tax court said that the corporations established by the Arnolds did not control their work.
- Fact Sheet # 13. Employment Relationship Under the Fair Labor Standards Act (FLSA)
- United States Department of Labor – Fair Labor Standards Act – Independent Contractors
- United State Department of Labor – Wage and Hour Division (WHD) – Employee Misclassification as Independent Contractors
- Other Resources
- March 2011 Update of Employee/Independent Contractor Misclassification Case Law, 2010-2011 prepared by Mayer Brown
- Employees, Employers, and Quasi-Employers: An Analysis of Employees and Employers Who Operate in the Borderland Between An Employer-and-Employee Relationship by Mitchell H. Rubinstein in the University of Pennsylvania Journal of Business Law
- Employment Law Briefing February/March 2012, Independent Contractor Misclassification by John C. Fox, Jay J. Wang and Alexa L. Morgan of Fox, Wang & Morgan, P.C.
- How to Deal with Worker Classification Tax Audits by Edward L. Froelich and James Merritt in Morrison & Foerster Monthly news, Volume 22, No. 4 April 2010.
- Employee or Independent Contractor: It’s Time to Assess by Daniel J. Aguilary in Morrison & Foerster Monthly news, Volume 22, No.3 March 2010.
- Employee or Entrepreneur? by Jeffrey M. Hirsch, Associate, University of Tennessee College of Law. Professor Hirsh reviews the NLRA and the employee/independent contractor issue
- How Companies Can Minimize the Risks of Independent Contractor Misclassification
- WorkerClassification.com – a source for worker classification news and developments. This site provides an overview of worker classification tests and links to state and federal statutes.
- Independent Contractor Misclassification Imposes Huges Costs on Workers and Federal and State Treasuries — National Employment Law Project
- Employee or Independent Contractor? — infographic prepared by Randstad
- The ABC Test to Determine: Employee or Independent Contractor — infographic prepared by Randstad
- Profile: Independent Contractor — infographic prepared by Randstad
- Working with Independent Contractors — Stephen Fishman, J.D. (July 2014, 8th Edition) Get the legal lowdown on how to beef up your workforce without risking the ire of the IRS. Misclassifying a worker can result in serious financial penalties from your state or the IRS. Working with Independent Contractors, you’ll learn how to: determine whether you can classify workers as independent contractors, create valid contracts, avoid government penalties, handle the IRS.
- Independent Contractors: What You Should Know From Inside the beltway
- Independent Contracting: Policy and Management Analysis – Columbia University
- Independent Contractor Versus Employee Status: A Global Perspective
- America’s Self-Employment Landscape,
- Discover Business — a variety of resources for your business including copy writing resource, logo design, and crowd funding.
- 5 Tips for Independent Contractor Agreements (blogs.findlaw.com)
- The Difference Between Freelancers and Employees (outright.com)
- Proper Independent Contractor Classification: The Legal Ramifications (texaslawtoday.com)
- Some other resources:
- Be Elite Basketball
- A Comprehensive Glossary Of The Most Common Accounting Terms