View source for To Be or Not to Be... An Independent Contractor

{{Infobox book
| italic title      = To Be or Not To Be... An Independent Contractor<!--(see above)-->
| name              = To Be or Not To Be... An Independent Contractor
| image             = ToBePhoto1.jpg
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| image_size        = 260px
| border            = yes
| alt               = 
| caption           = 
| author            = [[Jon Guerzon]]<!--(use [[name]], <br/> [[name]], <br/> to list multiple authors or subjects)--> 
| illustrator       = 
| subject           = <!--(acceptable subjects include: Editorial, Op/Ed, Article, Interview, How-To, Member Spotlight, etc. Multiple subjects see multimple authors)-->
| genre             = Article, <br> Business
| published         = [[EF issue 2019.3]]
| pub_date          = Summer 2019<!--(Should match EF Issue Published date)-->
| media_type        = Digital <!--(Digital, Print or both)-->
| pages             = 12-14 <!--(Page number(s) of the issue the article appears on)-->
| preceded_by       = <!--(Previous article in the issue)-->
| followed_by       = <!--(Next article in the issue)--> 
| notes             = 
| website           = {{URL|caricature.org}}
}}
[[File:ToBePhoto2.jpg|266px|thumb|right]]
[[File:ToBePhoto3.jpg|266px|thumb|right|Senate Republican Leader Shannon Grove
(R-Bakersfield) authored SB 238, a legislation
bill proposing that California’s test for
employment conform with an existing
federal standard.
15]]

This article appears in [[Exaggerated Features]] issue [[2019.3]]. It can be found on page 14.

==Article Transcript==
I am not a lawyer.<br>
I have not played one on TV.<br>
I don’t think I have drawn one.<br>
Do not consider my descriptions here as the final word.<br>
Please consult legal advice for further information.<br>

==== Overview ====
Simply said, the difference between
independent contractors and
employees is whether or not the
entity paying for services has the right
to control or direct the manner and
means of work (tending to signify an
employment relationship), or whether
the person providing the services has
independently made the decision to
go into business for himself or herself
(suggesting an independent contractor
relationship). Independent contractors
are not generally entitled to the same
protections as employees.

The business may be required
to give you Form 1099- MISC,
Miscellaneous Income, to report the
total amount paid
to you.

You are responsible for paying your
own income tax and self-employment
tax (Self-Employment Contributions
Act – SECA). The business does not
withhold taxes from your pay. You
may need to make estimated tax
payments during the year to cover
your tax liabilities.

You may deduct business expenses
on Schedule C of your income tax
return Form 1040.

For California artists, become familiar
with the recent California Supreme
Court decision in DYNAMEX v.
Superior Court of Los Angeles.

==== What are you? ====
Under federal tax law, employers must
prepare and provide employees with
an IRS Form W-2. For independent
contractors, however, an entity
would instead complete an IRS
Form 1099-MISC.

The IRS looks to common law tests
to determine whether someone
is an employee or an independent
contractor. The common law test
requires examination of all evidence
of the degree of control and
independence in the relationship. The
facts would be examined as they relate
to the following categories:

* Behavioral Control covers facts that show whether the business has a right to direct and control what work is accomplished and how the work is done through instructions, training, or other means.

* Someone who is required to complete assignments in a certain way at a certain place and time is more likely to be an employee than an independent contractor. If the entity receiving services provides training about required procedures and methods, this indicates the business wants the work done in a certain way.

* Financial Control covers facts that show whether the business has a right to direct or control the financial and business aspects of the worker’s job. This includes:

* The extent to which the worker has unreimbursed business expenses

* The extent of the worker’s investment in the facilities or tools used in performing services

* The extent to which the worker makes his or her services available to the relevant market

* How the business pays the worker, and

* The extent to which the worker can realize a profit or incur a loss

* In this area, the IRS would examine the following:

* Whether the worker pays his or her own expenses. That is more to be expected of an independent contractor than an employee.

* A significant investment by an individual into his or her own facilities, equipment, tools or supplies suggests the individual is in business for himself or herself rather than an employee.

* An independent contractor is generally free to seek out business opportunities. Independent contractors often advertise, maintain a visible business location, and are available to work in the relevant market.

* Someone in business for themselves may send out invoices to collect payment for services. An employee will receive a check at regular intervals.

* The ability of an individual to realize a profit or incur a loss suggests the person is in business for themselves.

* Relationship of the parties covers facts that show the type of relationship the parties had.

This includes:

* Written contracts describing the relationship the parties intended to create

* Whether the business provides the worker with employee-type benefits, such as insurance, a pension plan, vacation pay, or sick pay

* The permanence of the relationship, and

* The extent to which services performed by the worker are a key aspect of the regular business of the company.

*Behavioral Control covers facts that show whether the business has a right to direct and control what work is accomplished and how the work is done through instructions, training, or other means.

* Someone who is required to complete assignments in a certain way at a certain place and time is more likely to be an employee than an independent contractor. If the entity receiving services provides training about required procedures and methods, this indicates the business wants the work done in a certain way.

* Financial Control covers facts that show whether the business has a right to direct or control the financial and business aspects of the worker’s job. 

This includes:

* The extent to which the worker has unreimbursed business expenses

* The extent of the worker’s investment in the facilities or tools used in performing services

* The extent to which the worker makes his or her services available to the relevant market

* How the business pays the worker, and

* The extent to which the worker can realize a profit or incur a loss

In this area, the IRS would examine the following:

* Whether the worker pays his or her own expenses. That is more to be expected of an independent contractor than an employee.

* A significant investment by an individual into his or her own facilities, equipment, tools or supplies suggests the individual is in business for himself or herself rather than an employee.

* An independent contractor is generally free to seek out business opportunities. Independent contractors often advertise, maintain a visible business location, and are available to work in the relevant market.

* Someone in business for themselves may send out invoices to collect payment for services. An employee will receive a check at regular intervals.

* The ability of an individual to realize a profit or incur a loss suggests the person is in business for themselves.

* Relationship of the parties covers facts that show the type of relationship the parties had.

This includes:

* Written contracts describing the relationship the parties intended to create

* Whether the business provides the worker with employee-type benefits, such as insurance, a pension plan, vacation pay, or sick pay

* The permanence of the relationship, and

* The extent to which services performed by the worker are a key aspect of the regular business of the company.

The following examples may help to properly classify your work or workers.

===== Example 1 =====
Cameron Smith, an artist, is
approached by Megatoons.
Megatoons agrees to pay Cameron a
flat amount to complete a one-time
project to create a certain product.
It isn’t clear how long it will take to
complete the project, and Cameron
isn’t guaranteed any minimum
payment for the hours spent on
the artwork. Megatoons provides
Cameron with no instructions beyond
the specifications for the product
itself. Cameron and Megatoons have
a written contract, which provides
that Cameron is considered to be an
independent contractor, is required
to pay federal and state taxes, and
receives no benefits from Megatoons.
Megatoons will file Form 1099-MISC,
Miscellaneous Income, to report the
amount paid to Cameron. Cameron
works at home and isn’t expected or
allowed to attend meetings of the art
development group.

Cameron is an independent contractor.

=====Example 2=====
Damon Blam performs art services in
the art department of an art company.
He works regular hours and is paid
on a percentage basis. He has no
investment in the art department. The
art company supplies all facilities, art
parts, and supplies; issues instructions
on the amounts to be charged,
techniques to be used, and the time
for completion of each job; and checks
all quotes and art orders. 

Damon is an
employee of the art company.

=====Example 3=====
An art agency furnishes space for Jen
Bund to perform art services. She
provides her own tools, equipment,
and supplies. She seeks out
business from art collectors and
other individuals and does all of the
artwork that comes to the agency.
She hires and discharges her own
helpers, determines her own and her
helpers’ working hours, quotes prices
for artwork, makes all necessary
adjustments, assumes all losses from
uncollectible accounts, and receives,
as compensation for her services,
a large percentage of the gross
collections from the art sales. 

Jen is
an independent contractor and the
helpers are her employees.

If you are not sure whether you or your
worker should be classified as W-2 or
1099 for purposes of federal income
tax withholding, you may request the
IRS to make the determination for you.
This is done by filing a request on IRS
Form SS-8. The IRS will acknowledge
receipt of your Form SS-8 and assign
it to a technician to review, apply
the law and decide. This may take
up to six months.

According to an article from the Los
Angeles Times, the hiring of workers
as independent contractors has
recently “exploded.” The article cites
a 2016 study by economists that
estimates that 12.5 million people, or
8.4% of the U.S. workforce, are now
deemed independent contractors.
In the interest of treating workers
right and to avoid potentially hefty
penalties, a business should take every
precaution to ensure that they bring
on independent contractors in a way
that aligns with the law.

==See Also==

==External Links==
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