There was a short article recently in USA Today about how the IRS and several states are keeping a close eye on companies that are changing the status of employees to independent contractors. Since many small businesses legitimately use independent contractors as mechanics, teachers, etc. we thought it might be a good idea to post something the use of independent contractors. The article describes how businesses can save up to 30% in payroll, so states are acting more aggressively during these tough times to shore up their struggling budgets.
At the end of the article are two excellent links that give some very good information on the differences between employees and independent contractors and in what situation to use each. Some of the best advice is in the article Should you hire an employee or independent contractor?. The point it makes is if you are going to use independent contractors, make sure and check with your attorney to make sure you are well within the law, and talk to your accountant to make sure all necessary tax forms are completed and done correctly. In these times the IRS and states are going to make sure small businesses are in complete compliance.