July 11, 2024

If you classify an employee as an independent contractor and you have no reasonable basis for doing so, then you may be held liable for employment taxes for that worker. For those of you who have classification preferences with respect to particular workers, the following is a brief overview of some issues the IRS examines to determine whether your worker is an employee or an independent contractor.

• Employee benefits: Businesses typically do not grant benefits such as health insurance, retirement plans, paid vacation, sick days and disability insurance to independent contractors.

• Permanency of the relationship: Generally, an employee is hired with the expectation that the relationship will continue long term, whereas an independent contractor is hired for a specific short-term project or period.

• Types of instructions given: An employee is usually bound by the business’s instructions on when, where and how to perform its duties, e.g., what work must be performed, when to do the work, what tools or equipment to use, and what order or sequence to follow when performing the work.

• Training: If the business trains a worker on how to do the job in a particular way, then this is strong evidence that the worker is an employee. Periodic or on-going training is even stronger evidence of an employer-employee relationship. Conversely, independent contractors typically receive no such training and use their own methods to perform their duties.

While a well-drafted employment agreement can manage expectations between your dental practice and an employee or independent contractor, the IRS’s determination as to a worker’s status for tax purposes is not restricted to its terms. Accordingly, it would be wise to apply the above items in your practice appropriately.

Questions or comments? Please contact us at (646) 213-9044 or Admin@AndrieuxLaw.com.