Since the dawn of time (or at least the dawn of the Fair Labor Standards Act), employers have been plagued by the question, “Employee or Independent Contractor?”
One of these things is not like the other. Can you spot the Independent Contractor in the group? (HINT: it’s the one who looks like they’ve been up late calculating their 2018 business auto mileage.)
It’s no big secret that employers would generally prefer to classify workers as independent contractors for financial, administrative and occasionally “please-don’t-come-back-tomorrow” reasons. However, the legal criteria for classifying someone as an independent contractor continues to get harder and harder to meet.
The most recent change in California (and in a few other states so far) has led to the application of what’s called the “ABC Test,” in which all workers are considered employees unless all three conditions below are met:
A. The worker is free from the control and direction of the hirer in relation to the performance of the work
B. The worker performs work that is outside the usual course of the hirer’s business
C. The worker is customarily engaged in an independently established trade, occupation or business of the same nature as the work performed for the hirer
As you can see, it’s verrrrry difficult criteria to meet. That might mean that congratulations are in order: you have some new employees! (Not quite sure? Here’s a quick tool to help you make the determination for yourself.)
The typical reaction of an employer to the news that their long-time independent contractor is actually an employee and they need to revise more than a year of payroll.
If you DO have employees and don’t know where to start payroll-wise, don’t be scared. Gusto is my absolute favorite service and I recommend it to all of my clients. It boasts a beautiful, easy-to-use interface that seamlessly integrates with Quickbooks Online AND it can be used to determine and pay Worker’s Compensation based on the actual payroll processed. Set-up is relatively straightforward, but we’re happy to jump in if you’re looking for professional help with integration.
As complicated as the topic is, we can be grateful that we don’t need to answer the following question (yet): Employee, Contractor, or ROBOT?
And, of course, April comes along with a slew of delightful deadlines—
APRIL DEADLINES
April 15, 2019 - Deadline to file 2018 individual tax returns (Form 1040)
April 15, 2019 - Last day to make a contribution to your IRA, 401K or HSA for the 2018 tax year
April 15, 2019 - First-quarter estimated tax payments due for the 2019 tax year
April 15, 2019 - Deadline to file 2018 estate income tax or trust income tax returns (Form 1041)
Happy filing (and hiring)!