Definition of subcontractor vs. employee

Hi Wendy - this is what the IRS says is an “Independent
subcontractor”. This is taken from form 533 ('98 version), which
you can view from the IRS website (don’t have the address offhand

  • a simple search should find it).

"Independent Subcontractor People such as lawyers, contractors,
subcontractors, public stenographers, auctioneers, who follow an
independent trade, business, or profession in which they offer
their services to the general public are generally not employees.
However, whether those people are independent contractors or
employees depends on the facts in each case. The general rule is
than an individual is an independent contractor if the payer has
the right to control or direct only the result of the work and
not what will be done and how it will be done. Income earned by
an independent contractor is SE [self-employment] income.

You are not an independent contractor if you perform services
that can be controlled by an employer (what will be done and how
it will be done). This applies even if you are given freedom of
action. What matters is that the employer has the legal right to
control the details of how the services are performed. If an
employer-employee relationship exists (no matter what the
relationship is called), you are not an independent contractor.

For more in determining whether you are an
independent contractor or an employee, get Publication 15-A."

Hope this helps! If you have doubts, I would really talk to a
professional tax accountant. Regards, Lori Bugaj
One-Eyed Collie Jewelry Design

I love this stuff! According to this definition, you hire a
house painter… then if you “direct” him (express your desires)
to paint your house white with green trim, and further request
that he uses a ten year paint, and gets the job done within the
week - he is your employee!

Brian Marshall

(The best part…“Whether those people are independant
contractors or employees, depends on the facts in each case” -
perfect example of government doublespeak.)

people - as a former aero-defense mechanical design
(sub)contractor & gs11 employee i know a little about the
definition of the two terms. subcontractor: a person who signs
an agreement/contract with an employer to perform certain work
with the end goal/results mutually established & understood. as
a subcontractor no pension is accrued, no health benefits or
major medical (workman’s comp is in force), no paid vacation.
but as a subcontractor i did have certain benefits: my hourly
rate was usually double what the in-house staff is getting, all
of my overtime was double my hourly rate for weekends & triple
time on holidays. and when i started with a $35.00 hour rate
(1980s) that did seem more beneficial to me than most employee
perks at the time. ive

Oh yes, double speak, without a doubt. But when in doubt, if the
person has a business of his/her own, and works for more than one
client at a time, then they are “independent”. If you are giving
them the right to “run” your business, and tell them how you
want it done, and they are not running a business for themselves
or have their own license, they are your employees. They are also
your employees if they have a business and are not doing EXACTLY
the same thing as you are asking them to do. I went through an
audit for this. I had hired professional Ballet dancers to guest
teach at my school. The audit declared they were my employees,
because they were not “teachers” and did not teach in other
schools at the SAME TIME, as they were teaching in mine. (or same
week, not the exact same hour and min., but I wouldn’t put it
past the govn’t to declare that double speak valid)

It is touchy…when in doubt, just take them on as
employees…with all the lousy paperwork and mess that goes along
with it. It is a mess to be flagged by having “independent
contractors”. m.