Let’s start with a simple scenario to highlight the issue: An Attorney has his office painted throughout the year by a group of workers. They come in before office hours to make sure the day to day operations of the firm are not interrupted. The work consists of touch up and minor paint jobs throughout the office. Are they employees, where payroll taxes should be withheld on each check and a W2 issued at the end of the year, or Independent Contractors, where a 1099 should be issued when payments exceed $600 for the year? Before we give the answer, let’s briefly define what an Employee and an Independent Contractor is based on how the EDD (Employment Development Department) defines them.
- Told when to show up and leave work
- Paid by time or a piece rate
- Provided with supplies, and tools to complete their work
Independent Contractor –
- Engaged in separately established business
- Control when to show up and complete the work
- Right to control the way the work is completed
- Customarily perform jobs for more than one business
- http://www.edd.ca.gov/pdf_pub_ctr/de38.pdf this guide is useful for making your own decisions about how to classify your workers.
- http://www.edd.ca.gov/pdf_pub_ctr/de1870.pdf this form can be used to allow the EDD to make a decision based on the information provided.
- http://www.edd.ca.gov/pdf_pub_ctr/de231.pdf a quick guide to how the EDD defines employees vs. independent contractors.