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Financial Planning / Tax Strategies
|Subject: Re: employee and contract labor||Date: 10/16/2013 1:47 PM|
|Author: Wradical||Number: 119325 of 122910|
Can a person work as an employee and contract labor for the same company? For example, can a person be contract labor for special projects and an employee as a relief receptionist?
In theory, you generally have to be one or the other. Practically, it depends on who's doing the reporting. And if you ask the IRS, they'd tell you it's a nonsensical question, because they've never met an independent contractor. They regard the concept as science fiction, even though recent changes in the economy have an awful lot of people working as freelancers, including at their old jobs. They want everyone to be an employee subject to withholding.
THAT WAS true, until about a year ago, when IRS issued Info Letter 2012-0069, in response to an inquiry from a congressman, who was trying to intervene on a constituent's behalf.
In that case they said yes. A person could be a consultant for a specific project, and an employee for something else. Like the situation you describe.
Keep in mind that is not a general ruling, and only directly pertains to the parties in question. AND the IRS lawyer who came up with it may have been a friend of the congressman or his staff.
It's more common for a person to change from one status to the other, but not be both at the same time. A person could be a freelancer who gets hired permanently. Or a former employee does odd jobs as a freelancer. The IRS is more skeptical of the latter situation. But it happens.
And they don't like it when a company gives an employee a 1099-MISC just because they forgot to report some odd taxable benefit on his W-2, and they don't want to bother changing their W-2,W-3 and 941 reconciliations. But that happens all the time. Somebody gets a 1099 for personal use of company car, or taxable life coverage, etc. That happens all the time, but it's not right.
Can a contract labor person qualify for the employer’s health/dental insurance?
That depends on the terms of the company health plan and group policy, etc. It's not unusual for corporate board members to be on the health plan. (Even IRS agrees they're self-employed. That's a law.)
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