Independent Contractors
Most businesses use independent contractors either on a regular basis or from time to time. Operating as if a person or entity is an independent contractor; then discovering that the Oklahoma Employment Security Commission, Oklahoma Department of Labor or the Internal Revenue Service considers the person an employee can be disastrous. Past due worker's compensation insurance premiums, past due taxes and additional liability can be substantial.
Below is some practical information I put together to assist you and potentially clients or customers in maximizing the chances that your independent contractor relationships are viewed by all the applicable government agencies.
1. Use written agreements to document the relationship. The written agreement can be a powerful source of documentation of the independent nature of the relationship. As a result, it is essential that the written agreement is drafted in a way to operate as proof of an independent contractor relationship.
2. Use an Affidavit of Independent Contractor Status. This document is considered by insurance companies when determining whether or not to require worker's compensation insurance. If you would like a copy of this document, please give me a call.
3. File the appropriate tax documentation, whether with the Oklahoma Tax Commission or the 1099 through the IRS.
4. Be certain that it is the independent contractor that determines the manner and means to accomplish the task. You can retain control of the outcome or final product.
5. Require the independent contractor to provide you with invoices prior to payment. Employees, by law, must be paid on a regular basis, while an independent contractor should be paid based on the work performed.
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