More advice for small salons – employees or independent contractors?

March 3, 2008

I would like you to read this whole article if you have (or are thinking of having) booth rental in your salon.

If there is one thing you don’t want, it’s to piss off the IRS!

Here’s an excerpt:

A sticky issue for many small employers revolves around who is an employee versus who is an independent contractor.

Many smaller companies use independent contractors to keep employee expenses lower. Independent contractors are engaged for specific projects, so there are only costs to the company hiring them when there is specific work to be performed. In addition, independent contractors do not have to be covered under workers’ compensation insurance or other employee benefits, and the company does not have to pay the employer portion of Social Security and Medicare taxes.

However, the Internal Revenue Service and the courts have established strict guidelines on who can be considered a true independent contractor in recent years. This has come in large part because of employers who used the status of independent contractor on people who were really employees simply to reduce their costs by saving on benefit costs and the expense associated with the employer Social Security match. The status of independent contractor versus employee is not guided by a specific law, but by a series of court cases. There is no simple checklist, but rather a growing list of criteria that help determine independent contractor status. Therefore, a certified public accountant or an attorney should be consulted to help assure that a business is in compliance with the current interpretation of this area of tax law.


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