Hi, I want to start a home cleaning service, but I am interested in hiring independent contractors to do the bulk of the work, so that they will be responsible for filing their own taxes. Is it possible to register my business as a sole proprietorship if I intend to have independent contractors?
2007-12-10 08:07:14 · 3 answers · asked by kimmy 2 in Business & Finance ➔ Taxes ➔ United States
Given that you will almost certainly be directing their work you can't do that. They are your employees and will have to be paid as such. You can do that as a Sole Proprietor but the law determines who is an employee and who is an IC.
If you want to get an official ruling on that, file Form SS-8 with the IRS for a determination but I'll bet a steak dinner that the IRS says: Employee.
2007-12-10 08:30:18 · answer #1 · answered by Bostonian In MO 7 · 1⤊ 0⤋
One of the biggest challenges I face is keeping clients on the straight and narrow in regards to payroll issues. Contrary to common belief, one does not have an option of being an employee or a contractor. The facts determine the status, not what someone wants it to be.
If you pay subcontractors who are later determined to be employees the tax consequences to you can be devastating. You will be liable for all past due Fica and withholdings, interest, and penalties. On top of that you are personally responsible, even if you are incorporated. Those taxes are protected from bankruptcy proceedings.
If you have anything left after the IRS is done with you, your state unemployment and workers comp agencies may well get the rest.
2007-12-10 08:53:09 · answer #2 · answered by taxreff 7 · 0⤊ 0⤋
I'm with Bostonian.
If you dictate where the individual goes, how long it should take, what duties to perform and how. That's an employee.
If, on the other hand, you're were just getting referrals/appointments for your 'hires' and left the who, what , when and where up to them, that's entirely different.
2007-12-10 08:43:35 · answer #3 · answered by Celeste 6 · 0⤊ 0⤋