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Employee vs. Independent Contractor

Employee vs. Independent Contractor

Scenario
Madrid and Berne is a top-rated accounting firm with offices in Phoenix and Tucson. Madrid and Berne wanted to provide bookkeeping as an additional service to its clients. It hired Joan Newman Business Services, with offices in Phoenix, Flagstaff, Tucson, and Yuma, to perform contract bookkeeping services for Madrid and Berne clients who requested and needed such services. Madrid and Berne entered into an independent contractor agreement with Joan Newman Business Services. The contract stated that Joan Newman is an independent contractor and agrees that her business is an independent contractor of Madrid and Berne.
After entering into the agreement, Joan worked solely on jobs assigned by Madrid and Berne and was paid a commission for the work. The commission was based upon the fees determined by Madrid and Berne and paid by the clients to Madrid and Berne. Joan was paid on a weekly basis. She used available and unused office space at Madrid and Berne, along with Madrid and Berne’s equipment and supplies. This arrangement made it easier for clients to utilize Joan’s services and be familiar with the offices. Madrid and Berne reviewed Joan’s work and returned faulty work to her for corrections before delivering the completed work to the clients.
Assignment
Consider and apply the feedback provided by your instructor regarding your discussion of the following in your Topic 6 assignment submission. Evidence of revision will be assessed and should be evident.
Provide an explanation of why it is important to know the distinctions between employees and independent contractors when operating a business.
Discuss the key factors for determining Joan’s employee classification using the concepts that have been presented so far in the course and your own research relevant to the scenario.
Using the rules for distinguishing between employee and independent contractor, discuss whether Joan’s designation as an independent contractor was correct, and justify your designation by citing laws and federal regulations.
In an additional 250-500 words, discuss the following from a Christian worldview perspective.
One ethical issue or dilemma the scenario presents for Madrid and Berne and strategies for addressing the issue or dilemma.
One ethical issue or dilemma the scenario presents for Joan Newman and strategies for addressing the issue or dilemma.

An independent contractor is a person, business, or corporation that provides goods or services under a written contract or a verbal agreement. An independent professional can be a particular person, enterprise, or corporation that offers services or goods within a composed commitment or even a verbal arrangement. A simple specialist is really a private, firm, or business that offers services or goods within published contract or maybe a dental responsibility. Building contractors often go through a small firm or franchise, that they themselves very own, or may get through an umbrella organization.

In the United States, any company or business engaged in a buy and sell or organization that pays off a lot more than $600 to an independent service provider in a 12 months is necessary to record this for the Inner Income Assistance (IRS) as well as to the contractor, employing Form 1099-NEC. In america, any organization or company engaged in a industry or enterprise that will pay a lot more than $600 to an self-sufficient service provider in one year is necessary to statement this on the Internal Revenue Services (IRS) or even the professional, making use of Form 1099-NEC. The difference between unbiased service provider and staff is really a one in the usa, since the fees for business owners to preserve workers are significantly higher than the expenses associated with employing impartial contractors, as a result of federal and state demands for businesses to pay FICA (Sociable Safety and Medicare insurance taxation) and unemployment taxes on obtained income for employees.[1] Similarly, workers are protected from simply being fired without cause, of course, if fired or let go for other reasons are eligible to unemployment advantages, whilst independent companies have neither defense nor entitlement. Staff is also entitled to receive overtime pay for function carried out within the 40-60 minutes-per-week standard, whereas independent installers may job any number of time (including far above this common) without change in pay out.

During the early 1990s, the internal revenue service methodically started out to search for companies who are misclassifying staff as unbiased contractors, and possesses since attained vast amounts of bucks in Interpersonal Safety back taxation.[1] Lately, staff member classification initiatives happen to be a top-notch priority for your IRS, the Office of Effort, and express organizations. This Year, the IRS as well as the Division of Work entered a memorandum of understanding in an attempt to jointly raise worker misclassification audits.[2]

America Superior Courtroom has offered these rules to distinguish staff from independent companies:

The extent in which professional services are important towards the employer’s organization. Higher incorporation favors a member of staff-workplace partnership. The permanence of your connection. More founded interactions favor employee standing. The level of purchase in equipment. Whenever a worker constitutes a considerable purchase from the devices they normally use in working for another person, this indicates a completely independent service provider romantic relationship. The degree of control by the principal. The level of control through the principal. The amount of economic danger. A lot more chance for earnings or reduction favors an independent contractor connection. The quantity of motivation, opinion or foresight in available-market rivalry with other individuals necessary for the achievements of the claimed unbiased organization. Entrepreneurial and distinctive job mementos an unbiased contractor relationship.[3] The IRS, for federal tax, is true a “straight to control check” which takes into account the type in the working relationship.[4] They spotlight three standard elements of the career set up:

fiscal management behavior manage romantic relationship between your functions Generally, their standards parallel the ones from the Supreme Court in emotion. They incorporate recommendations for example the volume of instructions, education, incorporation, use of assistants, length of specialist relationship, regularity of employment, place of work, repayment timetable, method to obtain money for company expenditures, straight to cease, and economic danger a lot more typically observed with every function class. In their framework, independent contractors retain control over schedule and hours worked, jobs accepted, and performance monitoring. They also may have a main purchase in products, supply their own personal supplies, provide their own personal insurance coverage, maintenance, and other bills related to their company. They can also perform a distinctive assistance that is certainly not within the regular length of enterprise of your boss. This contrasts with employees, who usually work at the schedule required by the employer, and whose performance the employer directly supervises. Independent companies can also work with numerous companies, and offer their solutions to most people.[1]

The distinction between impartial building contractors and workers might not be obvious, and continues to change. For example, some impartial building contractors may work for a variety of distinct organizations throughout the year, while some keep self-sufficient contractor reputation although they operate for a similar company the whole year.[5] Other manufacturers, as an example from the freight move market, indicate the schedule for the independent contractor, demand buying vehicles through the business and prohibit work with other companies.[2]

In July 2015, the You.S. Division of Labour released new suggestions on the misclassification of staff members as independent companies. “A worker who is economically dependent on an employer is suffered or permitted to work by the employer. Therefore, utilizing the economical realities examination because of your expansive definition of “utilize” under the Work, most workers are employees beneath the Acceptable Effort Requirements Respond. Self-sufficient getting has both advantages and disadvantages to companies.

Advantages Since they are rarely tied to an employer, they are free to set their own rules of business, limited only by bargaining power. Since they usually develop a large network of clients, the loss of one or two often has a negligible effect. Given that they usually create a sizeable group of customers, the losing of one or two often includes a negligible impact. Aside from materialistic benefits, lots of people simply get pleasure from not having to answer to a supervisor. For an designer/author of any perceptible artwork, for example paintings, sculptures, images, or published works, one is entitled to distinctive trademark acquisition should they come up with serve as a completely independent service provider. In the event the individual produced such operates in the use of some other man or woman or business, the proper rights participate in the employer (under most regular career commitments). Organizations within the discussing overall economy including Uber can acquire substantial positive aspects using the misclassification of staff members as unbiased building contractors.[8]

Down sides In the United States, an inside Earnings Support computer algorithm criteria complements those that have Form 1099s on the company that compensates them. If an independent contractor reports more than $10,000 of earnings, or majority of income from a single source, the IRS is likely to question the independence of the worker, and investigate the company that issued the Form 1099.[1] Employer misclassification of employees as independent contractors either inadvertently or to avoid taxation and regulation, is widespread.[9] Additionally, contractorization has been used as an indirect form of union-busting.[10] An independent contractor can itself be a business with employees; however, in most cases in the United States independent contractors operate as a sole proprietorship or single-member limited liability company. If an independent contractor records more than $10,000 of income, or most of income from a single supply, the IRS is likely to question the independence of the employee, and investigate the business that released the Form 1099.[1] Company misclassification of staff as impartial contractors either inadvertently or perhaps to avoid taxation and legislation, is prevalent.[9] Furthermore, contractorization has been used for an indirect type of union-busting.[10] An independent service provider can itself be a company with employees nonetheless, typically in america independent building contractors operate as a sole proprietorship or solitary-participant constrained responsibility firm. Self-employment taxes are not withheld from the earnings of independent contractors who are required to voluntarily declare and pay estimated earnings taxes to the IRS, which can lead to a trap for contractors who run into financial difficulty and become tempted to put off making the required estimated tax payments. There are many financial benefits that are bound to workers in the usa, however, not impartial building contractors. Examples include worker’s payment and unemployment insurance however, impartial installers are allowed to make Personal Retirement life Accounts contributions.