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Contractor or Employee?
 
Check out the IRS Employer´s Supplemental Tax Guide, IRS Publication 15-A (pdf).
 
Consider These Questions:
  • Will you be controlling the means, manner, timing or methods of the contractor beyond those actions necessary to ensure compliance with the contract? If yes, your contractor could be interpreted as an employee.
  • Will you be supplying a workstation, office space, telephones, computers, etc., for the contractor?  If  yes, have you outlined how the contractor will pay the state?  If no, your contractor could be interpreted as an employee.
  • Are you allowing the contractor to drive state vehicles, have a state credit card and have access to state e-mail or other computer systems that are for employee use? If so, your contractor could be interpreted as an employee.
What are the Risks?
  • If your contractor is interpreted to be an employee, you could have to pay the employees medical insurance, pension, and all other benefits afforded to an employee. 
  • If your contractor is interpreted to be an employee, and you have not paid withholdings, etc., you could be liable for penalties.
  • If your contractor is hurt while performing the contract, and asserts they are an employee, you may have to pay their workers’ compensation claim. 
Revised 4/04