The Importance Of Classifying And Distinguishing Between Independent Contractors And Employees

1826 Words Feb 9th, 2015 8 Pages
Briggs, Latisha J.
HMR630
Week #1 Paper
February 7, 2015

The Importance of Classifying and Distinguishing Between Independent Contractors and Employee’s
Briggs, Latisha J.
National University

Abstract Through this paper we will explore the importance of distinguishings classifications between independent contractors and employees. We will examine identifying established relationship between employers and workers while covering assigned roles of employees and independent contractors. We will briefly discuss enacted laws and recommended practices to avoid misclassification penalties and consequences. Lastly, we will explore vital factors that should be considered while classifying workers.

The Importance of Distinguishing
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Law Journal academic author Jennifer Smith asserts the commonality of worker misclassification stating that, “Labor advocates and regulators say businesses commonly misclassify workers, depriving them of unemployment insurance and other protections and diverting billions of dollars a year from state and federal coffers. Studies by several states estimate that anywhere from 10% to 30% of employers misclassify workers” (Smith, 2013). Such results have caused the IRS to crack down on worker misclassifications. It vital that advisors and businesses remain aware of the importance of proper worker classification and implement best practices for avoiding enforces financial consequences and penalties imposed by the IRS.

Acknowledging and Identifying Existing Relationships Between Employers and Workers
In order to correctly classify workers, organizations must be aware of the established business relationship that currently exist between the one who assigns the task (employer) and the one who carries out the labor (worker). As I previously discussed, the most significant areas affected by improper classification are employee benefits and payroll taxes, both generate financial cost for employers. A worker that performs the labor falls under one of the four classifications, according to IRS Publication 15-A, Employer’s Supplemental Tax Guide (http://www.irs.gov/pub/irs-pdf/p15a.pdf).
Independent Contractors
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