Employee or contractor?

Like most small business accountants, I often find problems with misclassification of workers as contractors. Sometimes the problems find me after an employer has been penalized by the IRS or a state auditor and the owner now needs tax penalty relief just to stay in business.  Misclassification can be painful. I can cite plenty of casualties where firms paid a substantial tax penalty price for doing it the wrong way.

The point of this post is that your business has a choice to use either contractors or employees, or both if you prefer. But you must design your business practices to accommodate that choice, You simply won’t be safe from the tax collectors if you call your workers contractors when they look like employees.