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Playing By The “Independent Contractor” Rules

When you get to that breaking point in your business, personal life or non-profit where you need help you have choices-an employee or an independent contractor such as a virtual service provider. There is a difference and I thought this would be a good place to do an overview. One of the primary benefits to using a virtual service provider which includes virtual assistants is taxes and cost; cost because you are not providing insurance or other benefits typically associated with hiring an employee. But you’re also giving up a portion of the control you have with an employee.

Let’s use the IRS guide for what an independent contractor is, this is what the IRS says:  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.

Here are a few things to consider
-No insurance and retirement benefits are provided in addition to pay
– Independent Contractors generally set their own work schedules unlike employees
– Independent Contractors approach the how and what to completion of a task in their own way
– Independent Contractors provide their own tools and equipment
– Independent Contractors work your task and ask for feedback as needed
– Independent Contractors paid $600 or more should receive a 1099 by January 31, not a W2

As your virtual service provider you do stipulate the deadline for task however the how and what of the task is something I work on with you vs something you strictly control.

Here’s some good reading to help us understand why this matters and to help you decide if a virtual service provider is a right fit for you.

The IRS has more information on the topic : CLICK HERE
The Department of Labor has information on the topic: CLICK HERE

You can also get more information on the three essential elements of the definition of employment HERE . They are service, wages, and direction and control. Direction and control can be present in an employment relationship even if the employer does not exercise direction and control, but retains the right to do so.

Bottom line: the more control (how, providing training, supervision etc) you have or even try to have over how the work is done the more likely the person is to be considered an employee; this could have huge financial implications for you. If your style of getting things done is micro-management a virtual assistant may not be a right fit for you. It’s easy to blur the lines and as a virtual assistant, independent contractor and owner of my own business it is my pleasure to help us keep clear lines of demarcation.


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