When you first start a business there are many questions you need to answer and make sure you get them correctly. One of those questions are, “Who is an employee?” If you get this question wrong it could cost you thousands in penalties, you never expected.
Who Are Employees?
Generally, employees are defined either under common law or under statutes for certain situations. See the IRS Pub. 15-A for details on statutory employees and non-employees.
Employee status under common law. Generally, a worker who performs services for you is your employee if you have the right to control what will be done and how it will be done. This is so even when you give the employee freedom of action.
What matters is that you have the right to control the details of how the services are performed. If need more information on how to determine whether an individual providing services is an independent contractor or an employee, you can can read the complicated IRS publication or call our office for consultation.
Generally, people in business for themselves aren’t employees. For example, doctors, lawyers, veterinarians, and others in an independent trade in which they offer their services to the public are usually not employees.
However, if the business is incorporated, corporate officers who work in the business are employees of the corporation.
If an employer-employee relationship exists, it doesn’t matter what it is called.
The employee may be called an agent or independent contractor. It also doesn’t matter how payments are measured or paid, what they’re called, or if the employee works full or part time.
If you have questions on employees, please don’t hesitate to call me on my direct line at 909-570-1103 by email at Carlos@HealthcareTaxadvisor.com
Carlos Samaniego, EA
Enrolled Agent – NTPI Tax Fellow
Licensed by The Department of Treasury to represent taxpayers
Listen to my podcast on Anchor or your favorite podcast app – Click Here
1255 W Colton Ave, Redlands, CA 92374