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Physician's Guide to Medicine - Employee or Independent Contractor?
What is an employee?
What is the danger in improperly characterizing an
employee as an independent contractor?
What is the danger to the independent contractor
who has been mischaracterized as an employee?
How can one tell whether a person should be characterized
as an employee, versus an independent contractor?
What is an employee?
An employee is a person who performs services on behalf
of an employer where the employer has the right to control and direct the
employee regarding the details and means by which the employee performs services
on behalf of the employer.
What is the danger in improperly characterizing an employee as an independent
contractor?
Employers who improperly characterize their
workers as independent contractors may fail to withhold, remit, and pay income
and employment taxes. The Internal Revenue Service and the Missouri Department
of Revenue have the authority to institute back tax assessments.
What is the danger to the independent contractor who has been
mischaracterized as an employee?
This person may not have paid his or her
estimated income tax and/or self-employment tax.
In both of the foregoing situations, the Missouri Department of Revenue also has
the authority to assess penalties, interest, and back tax assessments for
failure to withhold, remit, and pay income and employment taxes.
How can one tell whether a person should be characterized as an employee,
versus an independent contractor?
First, it is important to note that merely designating
someone as an independent contractor in an agreement is not conclusive. The
essential factor to consider in determining whether one is acting as an employee
or an independent contractor is the extent of control by which the agreement,
the employer, or the master may exercise over the details of the work.
If evidence of control is not conclusive, the following factors will be
considered:
(1) Whether or not the one employed is engaged in a distinct occupation or
business;
(2) The kind of occupation, with reference to whether, in the locality, the work
is usually done under the director of the employer or by a specialist without
supervision;
(3) The skill required in the particular occupation;
(4) Whether the employer or the worker supplies the instrumentali-ties, tools,
and the place of work for the person doing the work;
(5) The length of time for which the person is employed;
(6) The method of payment, whether by the time or by the job;
(7) Whether or not the work is part of the regular business of the employer;
(8) Whether or not the parties believe they are creating the relation of master
and servant; and
(9) Whether the principal is or is not in business.
For IRS purposes, if the following factors are answered affirmatively, the
person on whose behalf the services are being performed will most likely be
considered by the IRS to be exercising enough control for the worker to be
properly characterized as an employee:
(1) The owner requires the worker to comply with the instructions of when,
where, and how to perform work;
(2) The owner provides training, by requiring the worker to work with another
more experienced employee or through other methods;
(3) The success or continuation of the owner´s business depends upon the
worker´s service;
(4) Services are to be rendered personally by the worker;
(5) The owner has the right to hire, supervise, and compensate assistants;
(6) There is a continuing relationship between the owner and worker;
(7) The owner has established hours to which the worker must adhere;
(8) The worker is required to devote substantially full time to the owner´s
business;
(9) The work must be performed on the owner´s premises;
(10) The owner controls the order in which the work is to be per-formed;
(11) The owner requires the worker to submit regular reports;
(12) The owner pays the worker by the hour, week, or month;
(13) The owner pays the business and travel expenses of the worker; and
(14) The owner furnishes significant tools, materials and other equipment.
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