You have just hired your nanny or senior caregiver and you are delighted. It was a difficult and time consuming process, and you are done. Then the day comes to pay your caregiver and you pause. Should you be deducting taxes? Can your caregiver just deal with these taxes herself? Is your caregiver your employee or an "independent contractor"? What is the difference between an employee and independent contractor and what does it mean to you?
HomeWork Solutions developed this Employee Independent v. Contractor Decision Tool Wizard to help you with this very important assessment. The key factors that determine employee v. independent contractor status are common law principles, the Fair Labor Standards Act (FLSA), and finally the decisions of some courts. Common law principles, used by the Internal Revenue Service, and the courts primarily focus on the level of control the employer has over what and how a worker performs her job. Secondarily they look at the method of compensation, your right to discharge the worker, and other factors. Interpretation of the FLSA centers on an "economic realities test" which looks at the level of dependence the worker has on your job as a source of income.
We invite you to use this Employee v. Independent Contractor Decision Tool to help you understand whether your nanny or caregiver is an employee or independent contractor.