How Does the IRS Look at Your Remote Administrative Support Consultant?
In recent years, companies have discovered the benefits of shifting their work force from regular nine-to-five employees to remote workers. You can observe a sharp increase in the number of businesses seeking remote Administrative Support Consultants online. This increased demand has even spurned the burgeoning of online-based companies that serve as go-betweens for small businesses and Administrative Support Consultants.
It seems like a win-win situation for all parties involved. Small businesses are not obliged to pay withholding taxes, the contractor is responsible. The IRS draws a fine line between Administrative support consultants who can be considered independent contractors and those that function as regular employees.
Before looking further into things, let us clarify a few points. First, “remote Administrative Support Consultant” is simply an Online Assistant. An Online Assistant may be working from anywhere in the world.
Second, not all online assistants can be considered independent contractors. The IRS provides guidelines to determine if it will judge a worker as an employee or a contractor, but it uses no formula for decisions.
Third, if the IRS rules your online assistant as a regular employee, this means that you should withhold their income tax. Otherwise, you will be liable for employment taxes left unpaid. This is unless the IRS agrees that you have justifications for filing your paperwork incorrectly.
IRS Guidelines: Employee or Independent Contractor?
The IRS is not obliged to acknowledge your online assistant as an independent contractor on the basis of a written agreement. In fact, it has required documentation from small businesses to verify that their administrative support consultants were indeed independent contractors as per filing.
In making its ruling, the IRS looks at three forms of control. First is behavioral control. If your workers do not have freedom in performing their jobs, most likely you should be withholding their income taxes during paydays. The IRS is inclined to classify workers as employees if you micromanage them. Specifically, setting work hours, providing training, monitoring employees through specific software and evaluating work habits indicate that you are treating your workers as employees.
Next is financial control. If you reimburse your online assistants for expenses incurred, you are one step closer to treating them as employees. Also, independent contractors should generally be free to look for other income sources.
Lastly, examine the type of relationship you have with your online assistants. Providing them with employee benefits means that you are treating them as nothing less than employees. Furthermore, if you hire an individual with a long-term relationship in mind, the IRS will be more likely to consider your relationship as that of an employer and employee.
Of course, it helps to look at the IRS guidelines themselves to have a clearer understanding of what constitutes an independent contractor. If you are still unsure, it is best to file Form SS-8 to determine if you should be filing withholding taxes for your online assistant.
Some say that the surest way to circumvent the issue is to have your online assistant register him or herself as a business or to source your assistants from an agency.