🚀 go-pugleaf

Paula Reynolds said:

 The situation: we want someone to come on-site and learn/get trained
on our stuff, so they could freelance.  I seem to recall that this
gentleman said if a freelancer came on site, used our equipment, met
our hours, followed our dress code, and did the primary amount of work
here, the IRS could consider that we were trying to have a permanent
employee without paying the various taxes.
---

This happens often in Silicon Valley, usually to programmers and other
engineers-for-hire but now frequently to writers/editors.  The people
at greatest risk for examination are "contract" workers who work for
one employer at a time, for a period of weeks or months (I know of a
few who have been on serial contracts for several years).  Naturally,
companies want to avoid all the rules, regulations, benefits, and
taxes involved in hiring permanent employees, and the IRS makes them
prove that they are not just evading the laws.  

On the freelancers' side, the burden is to prove that you control the
time and method of your work and that you work unsupervised.  Things
really get sticky if the employer provides a desk and equipment and
asks you to work on-site during their regular hours.  If you have
several clients (proving that you are not working as an employee for
just one), do most of your work at your own office or home (it's OK to
go in for meetings, for instance), choose your own hours, and do
professional work, you will be "allowed" to pay your own FICA
self-employment taxes and finance all your own benefits.  Keep good
records and be prepared to call witnesses if you are grilled by an IRS
agent.  Remember, with the taxman you have to prove your innocence--
you are presumed guilty.  It can be helpful to have your own business
cards and stationery and to have a professional-looking office with
all the proper reference books and computer equipment.  You may want
to file an assumed business name ("DBA") with your state and establish
a bank account in the business name.  Be sure you submit invoices, and
try to get a formal contract that explicitly spells out your
independent professional status (including the stuff about supervision
and autonomy of performance).

If you're the employer, get legal advice on writing your contract and
make sure your contract workers comply with all the rules, for both
your sakes.  You might be better off hiring somebody as a temp.
Audits are no fun.

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Kathleen Much, Editor		|Email: kathleen@casbs.stanford.EDU
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