Consultants are a great resource for companies to bring in expert advice or to handle specific projects. There are a lot of winery professionals that call themselves consultants, but as an employer and a company, there are a few things you need to think of when bringing on a consultant.
The IRS offers an online 12 point checklist to use to make sure you are hiring a consultant. A consultant is a business person who is responsible for their own business, taxes and marketing. A winery does not have any responsibility to a consultant other than that outlined in a consulting agreement. The general rule of thumb is that a person is an independent consultant if the hiring company has the right to control or direct only the result of the work, not what the work is to be done or how the work will be done.
The basic items the IRS checklist covers are:
A 20 point checklist has been created to see if a consultant is really able to be classified as a consultant. Here are the questions:
For the following questions, a "yes" answer means the worker is an employee.
1. Does the principal provide instructions to the worker about when, where, and how he or she is to perform the work?
2. Does the principal provide training to the worker?
3. Are the services provided by the worker integrated into the principal's business operations?
4. Must the services be rendered personally by the worker?
5. Does the principal hire, supervise and pay assistants to the worker?
6. Is there a continuing relationship between the principal and the worker?
7. Does the principal set the work hours and schedule?
8. Does the worker devote substantially full time to the business of the principal?
9. Is the work performed on the principal's premises?
10. Is the worker required to perform the services in an order or sequence set by the principal?
11. Is the worker required to submit oral or written reports to the principal?
12. Is the worker paid by the hour, week, or month?
13. Does the principal have the right to discharge the worker at will?
14. Can the worker terminate his or her relationship with the principal any time he or she wishes without incurring liability to the principal?
15. Does the principal pay the business or traveling expenses of the worker?
For the following questions, a "yes" answer means the worker is an independent contractor.
16. Does the worker furnish significant tools, materials and equipment?
17. Does the worker have a significant investment in facilities?
18. Can the worker realize a profit or loss as a result of his or her services?
19. Does the worker provide services for more than one firm at a time?
20. Does the worker make his or her services available to the general public?
(from TaxProphet.com, http://www.taxprophet.com/apps/active2/indep-mm.html).
Making sure your consultant is a true consultant and not a quasi-employee will allow you to have them bring their expertise to the company, and allow you the flexibility to maintain the appropriate compensation and employment relationship.
These points were previously discussed for consultants on WineTalent's employment blog at Avoid the Taxman: http://winetalent.blogspot.com
The IRS offers an online 12 point checklist to use to make sure you are hiring a consultant. A consultant is a business person who is responsible for their own business, taxes and marketing. A winery does not have any responsibility to a consultant other than that outlined in a consulting agreement. The general rule of thumb is that a person is an independent consultant if the hiring company has the right to control or direct only the result of the work, not what the work is to be done or how the work will be done.
The basic items the IRS checklist covers are:
- Behavioral Control: An independent consultant is not directed and controlled by the client. The client can only direct and control the work.
- Financial control: A contractor has a financial stake in the work, and will incur expenses that the client does not need to reimburse for. Also, a consultant can show a profit or incur a loss for their business, unlike an employee who is compensated with a salary.
- Relationship of the Parties: A contractor must maintain their own benefits, insurance and business activities. A consultant is not an employee, and therefore is not entitled to the same benefits an employee is.
A 20 point checklist has been created to see if a consultant is really able to be classified as a consultant. Here are the questions:
For the following questions, a "yes" answer means the worker is an employee.
1. Does the principal provide instructions to the worker about when, where, and how he or she is to perform the work?
2. Does the principal provide training to the worker?
3. Are the services provided by the worker integrated into the principal's business operations?
4. Must the services be rendered personally by the worker?
5. Does the principal hire, supervise and pay assistants to the worker?
6. Is there a continuing relationship between the principal and the worker?
7. Does the principal set the work hours and schedule?
8. Does the worker devote substantially full time to the business of the principal?
9. Is the work performed on the principal's premises?
10. Is the worker required to perform the services in an order or sequence set by the principal?
11. Is the worker required to submit oral or written reports to the principal?
12. Is the worker paid by the hour, week, or month?
13. Does the principal have the right to discharge the worker at will?
14. Can the worker terminate his or her relationship with the principal any time he or she wishes without incurring liability to the principal?
15. Does the principal pay the business or traveling expenses of the worker?
For the following questions, a "yes" answer means the worker is an independent contractor.
16. Does the worker furnish significant tools, materials and equipment?
17. Does the worker have a significant investment in facilities?
18. Can the worker realize a profit or loss as a result of his or her services?
19. Does the worker provide services for more than one firm at a time?
20. Does the worker make his or her services available to the general public?
(from TaxProphet.com, http://www.taxprophet.com/apps/active2/indep-mm.html).
Making sure your consultant is a true consultant and not a quasi-employee will allow you to have them bring their expertise to the company, and allow you the flexibility to maintain the appropriate compensation and employment relationship.
These points were previously discussed for consultants on WineTalent's employment blog at Avoid the Taxman: http://winetalent.blogspot.com
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