An Independent Contractor is someone who works for themselves, they either work from home or on site for special jobs. They pay their own taxes, which makes hiring an Independent Contractor much more convenient and affordable then hiring an employee. The employer saves on payroll taxes, workers compensation, unemployment and benefits. Wisconsin uses a strict nine-point test to determine whether a person is considered an independent contractor rather than an employee for purposes of workers’ compensation. The person must meet and maintain all 9 points in order to be exempt from workers’ compensation. If some points are vague and not met, the employer can face hefty taxes come tax time for classifying an employee as an Independent Contractor.
The 9 Points are: • Maintain a separate business. • Obtain a Federal Employer Identification Number (FEIN) from the IRS or have filed business or self-employment income tax returns with the IRS based on work or service in the previous year. (A Social Security number cannot be substituted for an FEIN to meet this requirement.) • Operate under specific contracts. • Be responsible for operating expenses under the contracts. • Be responsible for satisfactory performance of the work under the contracts. • Be paid per contract, per job, by commission, or by competitive bid. • Be subject to profit or loss in performing the work under the contracts. • Have recurring business liabilities and obligations. • Be in a position to succeed or fail if business expense exceeds income.
Yes, any person can claim they work for themselves and are an independent contractor, but depending on who wants to hire you, they most likely will look at whether or not you hit all these points.
I was told not to bother filing for a FEIN and to just use my social security number, but after doing research about what it truly means to work for yourself in Wisconsin, I knew getting a FEIN would solidify that I am a real independent contractor. Most employers, just from my recent experience, may not know that the state requires these items, and it is in YOUR best interest to provide them with that information. Not only does it make you look like you know your stuff, but you are also trustworthy and don’t want to see the person who’s paying you pay consequences come tax time.
If you are calling yourself an independent contractor and you are working from home, be the real deal and just research what your state requires. It can only help you in the end.
Chelsea Vecchione Administrative Service for Hire Facebook.com/officeninjamke
9 Points you should follow as a Independent Contractor in Wisconsin