• Employees Vs. Independent Contractors and Avoiding Prison Time

  • As you grow your Million Dollar Brand, you may have to start hiring people. The question is: Are these people hired as employees or independent contractors?

    During tax season, I wanted to share a common mis-practice among many businesses. If you get this wrong, you could face prison time. So, let's take a quick look at EMPLOYEES vs. INDEPENDENT CONTRACTORS. 

    It's estimated that 3.4 million employees are misclassified as independent contractors. If you are paying independent contractors, but they are supposed to be employees, you are responsible for 20% of total wages paid, 100% of all FICA tax, $1000 fine per person and could go to prison for 1 year. 

    So, how do you know if those working for you are independent contractors or employees? The IRS has a 20 Factor Test that you can consider when identifying if someone is an employee or an independent contractor. (Click link below for access to this test.)


    Don't forget if you paid someone more than $600 for a service in 2016, or $10 or in royalties, you must issue them a 1099 by January 31st. 

    If you are unsure if those who work for you should be classified as employees or independent contractors, you should contact your attorney and/or accountant.