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FAQ Hiring Manager FAQs | Independent Contractor FAQs
Who is an Independent Contractor (IC)?
Why do companies need a compliance process?
Why is the company concerned about the status of my contractor?
Why should I care about validating my contractor’s status? So the individual gets paid and the company avoids the risk of liability for back taxes and penalties. This process not only validates IC status, it also sets up the individual as an approved vendor, so their invoices will be paid when submitted. Also, managers are responsible for complying with all company policies and procedures. Violations of company policies regarding ICs reflect adversely on a manager's judgment and performance and, because it puts the organization at risk of substantial financial liability, could subject the manager to disciplinary action. What do I need to know before starting the process?
When do I start the IC Qualification process?
If I already had a contract with an IC, do I need to validate the status again? Yes, if the individual begins a new assignment. An individual's status as an Independent Contractor may vary from project to project, and as other employment factors vary. An individual validated as IC for one project must again be validated for future projects. What if the individual(s) work for their own company, corporation or partnership? This is not determinative of IC status. Even if they bill through their own corporation, partnership or LLC, their IC status must be validated. Do I still need to qualify a contractor who is incorporated or has worked as an independent contractor in the past? Yes. Neither incorporation nor past qualifications guarantee an independent contractor classification. The government looks not only at the contractor’s business structure, but also at how the working relationship is managed for each particular project. For example, the same contractor may meet the requirements for a project that allows them to work at home and choose their own hours, but not for one that requires close management and team participation. Who completes the on-line evaluation? The hiring manager begins the process by completing their portion of the evaluation. Once completed, the contract worker is then directed to complete their portion. How long will the qualifying process take? If you have thoroughly discussed the project with the contractor it will take only 15 minutes to submit your questionnaire. Once your contractor has submitted their questionnaire, you will have your answer within 30 minutes. What do I do if my contractor does not qualify as an IC? Hire the individual as a payrolled professional through TalentWave’s Payroll Service. Why is it such an issue to bring back former employees or returning retirees? The taxing authorities have found a simple way to identify potentially misclassified workers, such as former employees or returning retirees. When a company issues a W-2 and 1099 tax form to the same worker in the same year this heightens the risk of misclassification, as well as increasing the risk of an audit. Is it a conflict of interest for TalentWave to be performing the classification process and payrolling those contractors that do not qualify? TalentWave is compensated for each service performed, therefore it doesn't matter which recommendation is issued. The on-line qualification process is fully automated and ensures that recommendations are completely objective and cannot be influenced by human judgment or opinion.
Who is an Independent Contractor (IC)?
Why do I need to complete the on-line IC questionnaire? The questionnaire will help determine if you can be classified as an independent contractor according to IRS regulations (and thus avoid serious penalties for misclassification), provide necessary financial reporting data, and establish prudent and consistent business practices. Why does an IC have to provide documentation? To appropriately demonstrate that the independent contractor is set up and operating as an independent business. In an audit, the burden of proof is on the company. The first thing an auditor asks for is evidence of the contractor’s independent status. Audits can go back three years, making it unlikely that the contractor is available or motivated to then provide this evidence. Rebuilding / recreating these files is not just costly, but almost impossible after the fact. TalentWave keeps the information in strictest confidence and releases it only for audit defense purposes If my IC status for this project is rejected, do I have other options? Yes. Enroll as a payrolled professional through TalentWave. What are the benefits of using TalentWave’s Professional Payroll Service?
Doesn’t the contractor make less money if they are payrolled? The contractor ends up with the same if not greater disposable income because the employer’s contribution to taxes are paid by TalentWave. The contractor would normally be required to pay Self Employment Tax.
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