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.
Here are the relevant facts:
- The worker was not marketing his services to other firms.
Is the worker an employee or contractor?
Answer:
- The worker is an employee.
Explanation:
-
Workers who treat their income differently than employees and whose actions directly contribute to their own profitability levels are contractors. Those who have little in the way of variability of income due to their own decision-making are employees.