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Senior Advisor

Employee or Independent Contractor?

The IRS is very interested in whether your workers are employees or independent contractors.  It has to do wtih who pays how much of what tax.


"In determining if an individual is an employee, the IRS uses a 20-point test. The test can be divided into three basic categories. These are behavioral control, financial control, and the relationship between the worker and the farmer."


The IRS can impose some severe penalties upon the employer if the relationship is misrepresented.


However, IRS has some financially very attractive alternatibves out right now if the farmer decides he has been on the wrong side of the  determination. Check out the URL for examples.


I guess I don't really have any examples of this situation happening around here.  Do you see cases of seasonal workers who are probably more employees than independent contractors? 


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Honored Advisor

Re: Employee or Independent Contractor?

We hire employees for our routine farm production work, no question about that.  For most repairs that we don't do ourselves, we hire independent contractors.  I make a point of paying out of two separate accounts,  to simplify our comp audit.


The worst two examples I saw of abuse of the 1099 were both easy to catch, if anyone had been looking. 


One was our farm building contractor...he hid a lot of his income by overstating the pay to his guys.  They, being largely a bunch of drunks and druggies, didn't keep very good records, so were stuck carrying off his tax burden.   


Second cae was a house tenant of Mike's in VA.  He and his son were sawyers for a logging company.  Their boss paid them on 1099s, illegally, I am sure.  When a widowmaker hit the father in the head, nearly killing him and making him permanently disabled, the boss got nailed in court, for failure to carry worker's comp.  Judge burned him. 


So, there are all sorts of related issues in worker/employer relationships. 


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Re: Employee or Independent Contractor?

I worked as a cell phone salesman for about 6 months one time.  I think if the IRS has ever been involved I would have been considered and employee when I started.  One payday before he would give me my paycheck the boss required I sign a (in his words) "1099 form".  I think I knew more about taxes at the time than he did. That was about the time I came to the realization any one who would lie for you would lie to you.


I was discussing employee vs contractor with a friend who has a couple guys who that help little in the fall.  He's probably right on the edge when it comes to which way to go.  They do fall tillage on a per acre basis when a tractor is available and they have time. It would drive me nuts, but it works for them. He makes sure they have a fueled and ready to go tractor and know where they need to work, but he doesn't tell them when to start or stop and does not pay them by the hour.  The driver may show up every evening or may not be there for a week.  Once his harvest is over he takes over the driving and doesn't need the extra help.  He pays a little more per acre for slower field work and none of them ever get over $600 per year.


I told him I figure as long as nobody gets hurt and the IRS doesn't come looking he's probably OK.

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Senior Advisor

Re: Employee or Independent Contractor?

I know some fellow on here think that if I hire a dentist that I should issue the dentists employees a w-2.

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