b'Fall 2023 MARKETER MEMBER INDEPENDENT Contractor or EmployeeNewsThe IRS REQUIRESEnergy Marketers to Determine Worker StatusWashington, D.C.are given freedom of action. What matters is thatIt is critical that the employer has the legal right to control the business owners correctlydetails of how the services are performed.determine whether theTo determine whether an individual is anindividuals providing employee or an independent contractor, theservices are employees or relationship of the worker and the business must independent contractors.be examined. It doesnt matter if a business own-The Internal Revenueer labels a working relationship as an employer-Mark S. Morgan, EsqService (IRS) frequentlyemployee relationship. It makes no difference EMA Regulatory issues reminders tohow the relationship is labeled. The substance Counsel employers concerningof the relationship, not the label, governs the the importance of cor- workers status. In any employee-independent rectly making this determination. Under IRScontractor determination, all information that regulations, business owners must withholdprovides evidence of the degree of control and and deposit income taxes, Social Security taxesthe degree of independence must be considered.and Medicare taxes from the wages paid to an employee. Generally, employers are not requiredIn determining whether the person providing ser-to withhold or pay any taxes on payments tovice is an employee or an independent contrac-independent contractors (self-employed). tor, all information that provides evidence of the Whether a worker is an employee or independentdegree of control and independence a business contractor also often determines which federalowner has over a worker must be considered. regulatory compliance requirements a businessFacts that provide evidence of the degree ofowner must follow. Many federal regulationscontrol and independence over a worker fall have compliance triggers based on the number ofinto three categories:employees in a business or trade. This is impor- Behavioraltant because federal regulations reduce regula- Factorstory compliance burdens on companies that are classified as small business based on the numberDoes the business of employees in the workplace. owner controlor have Before determining how to treat paymentsthe right to control what made for services, a business owner must firstthe worker does and how the worker does their determine the business relationship that existsjob? These behavioral control factors fall into the with the person performing the services. Peoplecategories of:such as doctors, dentists, veterinarians, lawyers,Type of instructions given:An employee accountants, contractors, subcontractors, publicis generally subject to the business instructions stenographers or auctioneers who are in an about when, where and how to work. All the independent trade, business or profession infollowing are examples of types of instructions which they offer their services to the generalabout how to do work:public are generally independent contractors. However, whether these people are independent When and where to do the work.contractors or employees depends on the facts in What tools or equipment to use.each case. The general rule is that an individual is an independent contractor if the payer has the What workers to hire or to assist right to control or direct only the result of thewith the work.work and not what will be done and how it will be done. A worker is not an independent contrac-Where to purchase supplies and services.tor if they perform services that can be controlled What work must be performed byby an employer (what will be done and how it will be done). This applies even where workersa specified individual.38www.wpma.com / Fall 2023'