Overview: Independent contractors offer benefits and risks. The benefits include avoiding certain taxes, legal liabilities and administrative challenges.
However, the risks can be great. Before filling a position with an independent contractor, it is essential to carefully consider the myriad factors that go into properly classifying a worker as an independent contractor. An independent contractor should qualify not only under the tax code, but also several other state and federal employment laws that may come into play. Inaccurately classifying someone as an independent contractor can set an employer up for costly enforcement actions.
Trends: The Internal Revenue Service, the US Department of Labor and state agencies are cooperating to enforce independent contractor misclassification.
Author: Michael Cardman, Legal Editor
HR guidance on legally classifying and managing independent contractors under federal tax and employment laws.