Hiring a contractor or employee?

Female: This is an excerpt from Small Business School. Male 1: If you have an employee, you must pay them wages, you must deduct from the wages employee taxes, you must meet or match some of the tax liability and send this into the taxing authority, The Federal Government and your state government. If you are hiring an independent contractor, you pay them once and that is it. Male 2: Well, I got the answer. All of my employees are independent contractors. Male 1: Well, a lot of small business people like to say that, and a lot of small business people want to believe that because their liability is usually less the actual the number of dollars outlaid for job performed is less. Here is the problem, the government look at situations where there is a dispute. Whether or not you have an employee or an independent contractor and they look at things like this: Do you tell this person when to come to work? Do you provide the tools of work, business cards, PCs, desks, etc? Do you tell them the kind of work they need to do and get them rules for doing the work? Do they work for anybody else? And if you do not passed this test, if it looks like they are only working for you even though you are calling them an independent contractor and you tell them where to work and when to work and you provide the tools, you have an employee. And many small businesses have been hit rather hard by taxing authorities that come in and establish for the last 10 years you have been saying you have independent contractors but you really have not employees. You owe less 10 gazillion dollars in taxes. So your advice is do not fudge on this one? Do not fudge on it. If you have an independent contractor, someone chosen for a short period of time to do a particular task, of course them like an independent contractor and save whatever expenses you might otherwise expend if they were an employee. But if an employee, if they are with you longer than about 90 days, they are pretty much an employee. (Background Music) Start withholding and paying your matching and do not think you are fooling anybody. (Extro Music Playing)