The primary compliance requirements are based upon regulations provided by the following governmental agencies: Department of Labor, Internal Revenue Service (IRS), and Homeland Security. In addition, the IRS has a form which allows an individual who was paid as an independent contractor previously to challenge the status as contractor and request employment status which, in turn, holds the employer responsible for the employer share of FICA taxes. The new form indicates that if the individual is performing services in a substantially similar capacity or under similar direction and control as when they were an employee then they must be paid as an employee.
It is critical that you utilize the tools listed below to arrive at the employee or independent contractor decision prior to engaging the individual in any services. First, review the matrix and determine if you should engage as an employee or proceed to the ICC form. Once the ICC form is completed, it will indicate whether the individual is an independent contractor or employee.