Determine if a Candidate is an Independent Contractor or W-2 Employee

The IRS is on the prowl when it comes to employers misclassifying W-2 employees as 1099 Independent Contractors, and if you are a recruiter who runs your own back-office, you could be in the IRS’ sights!

A recent New York Times article warns that the IRS is cracking down on worker misclassification, and if you get caught in the crossfire, you could end up paying hefty fines and damaging your firm’s reputation.

So how do you avoid an IRS smackdown? The IRS has outlined three main criteria for determining correct worker classification that you will want to refer to whenever you are in doubt about how to classify contract candidates. The main thing to keep in mind is that the more control the client company will have over the contractor’s work, the more likely that the worker should be classified as a W-2 employee.

Here are some hints that a worker may be a W-2 employee rather than an Independent Contractor:

  • The company dictates how, when, and where the work must be performed.
  • The company provides equipment and tools.
  • The worker is not providing services to other companies.
  • The company reimburses expenses.
  • The worker is paid on an hourly or weekly basis rather than a flat fee for completing the project.

Remember, if you do determine that a contract candidate should be classified as a W-2 employee, you don’t have to handle the employment tasks and issues yourself. A back-office, such as FoxHire, can relieve you of the stress associated with maintaining contract employees.