Employers can see advantages from hiring independent contractors for their Maine-based small businesses. They can be hired on a per-project basis and then let go when the project is completed. Also, independent contractors tend to be more experienced workers and therefore don’t require the supervision that can be necessary with employees.

And you don’t have to pay fringe benefits or workers’ compensation for independent contractors.

Or do you? Misclassifying employees as independent contractors can lead to expensive situations such as back taxes, penalties, and fines. So it pays to know the difference.

Unfortunately, no single factor determines a worker’s status. The IRS and other government agencies, as well as courts that hear related cases, examine a variety of factors. As a general rule, however, the degree of control a business owner exercises over the worker determines whether he or she is an employee or independent contractor. For example, an employer would probably provide a workers’ materials and tools, while independent contractors usually provide their own. An employer sets an employee’s work hours while an independent contractor usually has the right to set their own schedule. Also, the more integrated or central a job is to a company’s operations, the more likely the worker is to be considered an employee.

To protect your business, you can request documents from an independent contractor that will help you prove his or her status. These include copies of advertising or directory listings, business name statements, an Employer Identification Number (if he or she has employees), and business licenses or professional licenses.

If you’re still unsure whether a worker qualifies as an independent contractor, Filler & Associates can help you make this determination.