As a small business owner you may hire people as independent contractors or as employees. There are rules that will help you determine how to classify the people you hire. This will affect how much you pay in taxes, whether you need to withhold from your workers paychecks and what tax documents you need to file.
Here are some things every business owner should know about hiring people as independent contractors versus hiring them as employees:
1. The IRS uses three characteristics to determine the relationship between businesses and workers:
" Behavioral Control covers facts that show whether the business has a right to direct or control how the work is done through instructions, training or other means.
" Financial Control covers facts that show whether the business has a right to direct or control the financial and business aspects of the worker's job.
" Type of Relationship factor relates to how the workers and the business owner perceive their relationship.
If you have the right to control or direct not only what is to be done, but also how it is to be done, then your workers are most likely employees.
2. If you can direct or control only the result of the work done -- and not the means and methods of accomplishing the result -- then your workers are probably independent contractors.
3. Employers who misclassify workers as independent contractors can end up with substantial tax bills. Additionally, they can face penalties for failing to pay employment taxes and for failing to file required tax forms.
4. Workers can avoid higher tax bills and lost benefits if they know their proper status.
5. Both employers and workers can ask the IRS to make a determination on whether a specific individual is an independent contractor or an employee by filing a Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding, with the IRS.
Allegheny Pennsylvania Contract with Veterinarian Assistant as Independent Contractor with Provisions for Termination with or without Cause In Allegheny, Pennsylvania, veterinarians often hire veterinary assistants as independent contractors to support their practice. These professionals play a crucial role in providing quality care to animals and ensuring the smooth operation of the clinic. A detailed contract is essential to establish the terms and conditions of their engagement, including provisions for termination with or without cause. Key Provisions in the Contract: 1. Parties: Clearly identify the parties involved in the agreement, namely the veterinarian and the veterinarian assistant (independent contractor). Include their full names, contact details, and any relevant licensing or certification information. 2. Term of Engagement: Specify the duration of the contract, whether it is for a fixed term or ongoing until terminated. 3. Scope of Services: Describe the specific duties and responsibilities of the veterinarian assistant, ensuring alignment with Pennsylvania state laws and regulations. Emphasize that the assistant shall perform services as an independent contractor and not as an employee. 4. Compensation and Payment: Outline how the veterinarian assistant will be compensated, such as an hourly rate or per-service fee. Clearly state payment terms, including the frequency and method of payment. 5. Independent Contractor Relationship: State explicitly that the veterinarian assistant is an independent contractor and not an employee of the veterinarian. Clarify that the assistant is responsible for their taxes, insurance, and other obligations. 6. Termination with Cause: Outline the conditions under which either party can terminate the contract with cause. Common causes for termination may include non-performance, violation of professional conduct, breaches of confidentiality, or failure to comply with legal requirements. 7. Termination without Cause: Include provisions for termination without cause, allowing either party to end the contract without specifying a particular reason. Indicate the required notice period for termination without cause, such as 30 days. 8. Mediation or Arbitration: Consider including a clause that requires mandatory mediation or arbitration in the event of disputes before pursuing legal action. This can help resolve conflicts more efficiently and cost-effectively. 9. Confidentiality and Non-Compete: Include provisions concerning the confidentiality of client information and any restrictions on the veterinarian assistant's ability to compete with the veterinarian's practice during or after the contract's term. Types of Contracts: 1. Fixed-Term Contract: This type of contract establishes a specific start and end date for the engagement, providing clarity regarding the duration of the relationship. 2. Open-Ended Contract: Alternatively, an open-ended contract can be used when the engagement does not have a predetermined end date. Such contracts typically include provisions for termination with or without cause. 3. Renewal Contract: In cases where the initial contract expires, a renewal contract can be drafted to extend the veterinarian assistant's engagement. This document should clearly state the terms and conditions for the renewed period. A well-drafted contract between a veterinarian and their independent contractor veterinarian assistant is crucial to ensure a mutually beneficial and legally sound working relationship. Consulting with legal professionals familiar with Pennsylvania state laws is advisable to include all necessary provisions and ensure compliance.
