b'2021 State ReportUtah UpdateMarketer InformationRules & RegulationsHOW to CORRECTLY IDENTIFY WORKERS as Employees or Independent ContractorsWWashington, D.C. -The Internal Revenue Service frequently issues reminders to employers concern-ing the importance of correctly determining whether individuals providing services for a business are employees or independent contractors. The answer to this question determines whether an employer is liable for payroll taxes which include federal, state, and local income taxes, federal and state unemployment taxes, and Medicare and Social Security taxes. Whether a worker is an employee or independent contractor is also important because many federal regulations have compliance triggers based on the number of employees in a business or trade. Mark S. Morgan, EsqAccording to IRS an employee is generally considered to be anyone who performs services, if the Regulatory Counselbusiness can control what will be done and how it will be done. What matters is that the business has Energy Marketers the right to control the details of how the workers services are performed. Independent contractors of America (EMA) are normally people in an independent trade, business, or profession in which they offer their services to the public. Doctors, dentists, veterinarians, lawyers, accountants, contractors, subcontractors,public stenographers, or auctioneers are generally independent contractors.Independent Contractor vs. Employee Who is Self-Employed? Whether a worker is an independent contractor or anGenerally, someone is self-employed if any of the employee depends on the relationship between thefollowing apply to them.worker and the business. Generally, there are threeThey carry on a trade or business as acategories to examine:sole proprietor.Behavioral Controldoes the company control or have the right to control what the workerA sole proprietor is someone who ownsdoes and how the worker does the job? an unincorporated business by himself or herself. However, if a person is the sole Financial Controldoes the business direct ormember of a domestic limited liability control the financial and business aspects ofcompany (LLC), that person is not a sole the workers job. Are the business aspectsproprietor if the person elects to treat the of the workers job controlled by the payer?LLC as a corporation.(Things like how the worker is paid, are They carry on a trade or business as anexpenses reimbursed, who provides tools/supplies, etc.) independent contractor.The general rule is that an individual is anRelationship of the Partiesare there written independent contractor if the payer has the contracts or employee type benefits (i.e.,right to control or direct only the result of pension plan, insurance, vacation pay, etc.)?the work and not what will be done and how Will the relationship continue and is the workit will be done.performed a key aspect of the business?If a person is an independent contractor, Misclassified WorkerMisclassifying workers as independent contractorsthen that person is self-employed. The adversely affects employees because the employersearnings of a person who is working as an share of taxes is not paid, and the employees share independent contractor are subject to self-is not withheld. If a business misclassified an em- employment tax.ployee without a reasonable basis, it could be held liable for employment taxes for that worker.Generally, an employer must withhold and payincome taxes, Social Security and Medicaretaxes, as well as unemployment taxes.24 www.wpma.com / Winter 2021'