IRS Advice on Independent Contractors vs. Employees

Caution: If you incorrectly classify an employee as an independent contractor, you can be held liable for employment taxes for that worker, plus a penalty. This liability can be

Who is an independent contractor?
The general rule is that you, the payer, have the right to control or direct only the result of the work done by an independent contractor, and not the means and methods of accomplishing the result.

Example: Vera Elm, an electrician, submitted a job estimate to a housing complex for electrical work at $16 per hour for 400 hours. She is to receive $1,280 every 2 weeks for the next 10 weeks. This is not considered payment by the hour. Even if she works more or less than 400 hours to complete the work, Ms. Elm will receive $6,400. She also performs additional electrical installations under contracts with other companies, which she obtained through advertisements. Thus, Vera is an independent contractor.