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Carl Johnson

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Re: Strippers and caddies may have a lot in common, New
« Reply #50 on: September 13, 2013, 01:11:26 PM »
Several points by way of background to the foregoing posts (I have not read every word above, so there may be some duplication):

(1) The employee and independent contractor categories are distinct categories, you're one or the other.  Such terms (and their legal consequences) as "temporary," "full-time," "part-time," and "seasonal" are subdivisions of the employee category.  I guess they could also be applied to independent contractors, but I have never seen it done and of hand can't think why it might be relevant.  It seems to me that some (not all) of the discussion confuses the concepts of (1) when or how much one works with (2) employee vs. independent contractor status.

So, an individual A works for B.  Is A an employee of B, or is A doing work for B as an independent contractor?  Whether he's an independent contractor or an employee is based on a number of factors.  http://www.michigan.gov/documents/wca/wca_irs_revenue_ruling_87-41_390318_7.pdf  It's a factual matter.  The answer is not always easy. The revenue ruling sets out the IRS position - it is not the law, per se.  If A is an independent contractor, end of story.  If A is an employee, then it's relevant to determine his employee status - temporary, part-time, full-time or seasonal (or, possibly, combination thereof).  These classifications can have lots of significance for the employee's and employer's rights and obligations.

(2) There are also, for tax purposes, statutory employees and statutory nonemployees.  A statutory employee is an individual who is an independent contractor (under the factors determination in (1) above), but who Congress by law (statute) says must be treated as an employee for tax purposes.  The statutory nonemployee is an individual who is an employee under the common law definition (above) but who Congress has said by law is to be treated as independent contractors for tax purposes.

(3) No one likes to pay taxes.  People hiring workers want to avoid paying/collecting taxes and providing benefits for as many workers as possible.  So in the real world many employers really stretch (and then pop, break) the limits of the law in "classifying" a worker as an independent contractor.  Some are silly enough to think if they can get the worker to sign a work contract agreeing that he (the worker) is an independent contractor, that's all it takes.

(4) The IRS does not make the law.  Congress makes the law and the IRS administers it.  If the IRS thinks someone is not paying their taxes properly, they'll go after them.  That's their job.  In the IRS's view, this may stem from an employer's reporting an individual as an independent contractor rather than as an employee (as the IRS thinks he should).  Obviously, there are lots of borderline cases.  In the case of a disagreement between the IRS and a person hiring a worker as to whether that worker is an employee of or an independent contractor for the person doing the hiring, they can settle it in court.  If the court sides with the IRS on the law, then the employer's next step is to go to Congress and get the law changed.  I'm not familiar with caddy legislation referred to above, but apparently the effect would have been to change the law so that a caddy, even if an employee under the common law rules, would be treated as a statutory nonemployee for tax purposes.

Yes, I know this is a simplification.
« Last Edit: September 15, 2013, 12:11:46 PM by Carl Johnson »