Are You an Independent Contractor or an Employee?

How do you know if your virtual assistant is working as an independent contractor or as an employee? Virtual Assistants are entrepreneurs and most entrepreneurs who offer service do so on a contractual basis. It is important for both the virtual assistant and the hiring owner to know how to maintain the proper worker status for various reasons, including the perception or your business and tax purposes.

Government agencies that review and can reclassify worker status include:

• the IRS
• your state tax department
• your state’s unemployment compensation insurance agency
• your states workers’ compensation insurance agency

Misclassification of a worker status may result in back taxes, fines, and penalties. Determine whether or not you are an independent contractor by asking yourself the following questions:
Do you have the right to control your work?
Do you have the right to decide how, where, and when the work is performed?
Do you offer your services to the general public?
Do you have more than one client at a time?

The Internal Revenue Service (IRS) gives the definition of an independent contractor as “People such as lawyers, contractors, subcontractors, and auctioneers who follow an independent trade, business, or profession in which they offer their services to the public, are generally not employees. However, whether such people are employees or independent contractors depends on the facts in each case. The general rule is that an individual is an independent contractor if you, the person for whom the services are performed, have the right to control or direct only the result of the work and not the means and methods of accomplishing the result.” (www.irs.gov)

For more information on Employee versus Independent Contractor (IC), please visit the following sites: