Employee or Contractor
Lesson:
It should be pointed out that simply calling someone an employee or a contractor doesn't not make him so.
In fact, even the tax treatment you select doesn't necessarily make a person a contractor or employee. Some firms will intentionally misclassify worker in order to reduce their tax burdens, though such actions open companies up to significant fines and penalties.
This exercise will focus on general rules that hold in most cases. Remember that there are always intricacies and details that can create exceptions.
You're an accountant, trying to figure out if a person is an employee or a contractor of your firm's owner. Your decision could go either way, except for this one fact.
You've been briefed with the following facts:
- The worker was not taken on for an indeterminate period time, rather than until project completion.
Is the worker an employee or contractor?
Answer:
- The worker is a contractor.
Explanation:
-
Workers who are strongly independent, in terms of treatment (financially and otherwise) are contractors. Others are employees.