Architecture firms may need to lure extra hands for all sorts of reasons. One might be to staff up for a sweet opportunity that’s too good to pass up, but is just a bit beyond the capacity of the office. Another might be to get the benefits of a specialist whose skills are perfect for a current project but might or might not be needed in the future. Those sorts of situations always present principals with a dilemma: do you hire new staff permanently or expand temporarily using hired guns? At first glance it appears that if the good times won’t last and overhead will have to be shaved when the project ends, independent contractors may seem to be the solution.
But don’t think that just because you’ve decided not to withhold income and social security taxes from a person’s wages that the Internal Revenue Service will agree that you’ve truly retained an independent contractor. The IRS can be very picky about this and it has certain tests to apply to any given situation. It can hit you with penalties if it disagrees about whether someone has been working for herself or as an employee of your practice. This is not only because it wants to protect workers from unscrupulous practices, but it also wants a smoother flow of tax payments and, ostensibly, a fairer market. “Employers that improperly deprive workers of benefits disadvantage those businesses that bear higher costs in complying with the law,” said Massachusetts’ tax agency in a 2004 advisory explaining its strict attitude. “In this way, independent contractor misclassification undermines fair market competition.”
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