HOUSEHOLD EMPLOYEE OR INDEPENDENT CONTRACTOR? WHAT'S THE DIFFERENCE?
ROCHESTER, N.Y., Feb. 9 /PRNewswire/ -- Should your gardener be classified as a household employee, or independent contractor? What about the caretaker who comes to your house once a week to watch the kids? Thanks to President Clinton's search for Attorney General, the American public has received quite an education on domestic help. And not just in terms of ethics, but on the implications of payroll and payroll tax issues. "The first thing is to determine how the worker should be classified," said Gene Polisseni, vice president of marketing for Paychex, Inc., a national payroll processing firm based in Rochester, N.Y. "The tax laws are different for household employees and independent contractors." Over 3.5 percent of the 6-1/2 million workers Paychex paid in 1992 were independent contractors, according to company officials. Determining whether a worker is an independent contractor or an employee depends primarily on the extent to which the person receiving the services has the right to direct and control the service provider with regard to what is to be done and how it is to be done. An employer generally has the right to control how an employee performs the service. Independent contractors determine for themselves how the work is to be performed. The IRS has developed a 20-factor control test, or set of guidelines, to be used to determine the extent of direction and control present in any situation. Not all factors need to be present in any given situation and no single factor controlling. The importance of each factor may vary depending on the situation. The greater the degree of control that exists based on these factors, the more likely it is that the individual will be an employee. What are the risks when you misclassify employees? Generally, the employer would have to pay back taxes, penalties and interest. The penalties are also dependent upon other factors, such as intentionally misclassifying or unintentionally misclassifying. -0- 2/9/93 /CONTACT: Kelly Ketchel Brown of Paychex, Inc., 716-383-3153/
CO: Paychex, Inc. ST: New York IN: SU:
BM -- CL018 -- 4784 02/09/93 15:34 EST
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|Date:||Feb 9, 1993|
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