Contractor vs. Employee Structuring

Classifying someone as an employee or independent contractor is not simply a matter of choice.

Classification depends on the actual working relationship and applicable legal and tax rules, including factors such as the degree of control, independence, financial arrangements and how the work is performed. We help clients assess those factors and determine how individuals should be engaged.

Getting the classification wrong can create significant tax and compliance consequences.

Misclassification may result in unpaid payroll taxes, penalties and interest, as well as employment and regulatory issues. In the United States, the IRS and other federal and state authorities apply their own tests and requirements, making it important to consider the arrangement before an individual is engaged rather than relying on the terminology used in a contract.