Both Texas Workforce Commission and the Internal Revenue Service have a set of criteria to determine whether or not a person is an independent contractor (or contract labor).  For exact detail go to IRS Publication 937, “Employment Taxes”, or Texas Workforce Commission Publication C-8. Or go online to www.texasworkforce.org/ui/tax/clabor. If you are still in doubt, submit IRS form SS-8 for an exact ruling on your business.

In a nutshell and in lay terms, both regulatory agencies begin by stating that if a person has a right to offer their services directly to the public then they might be classified as an independent contractor.  Then there are other factors to consider.  Some of these are:

1. Does the worker provide the materials, tools, and equipment to perform the job?
2. Does the worker pay the wages to other workers who assist him/her?
3. Does the worker provide the services under their own business name?
4. Does the worker set the work hours or schedule for performing the services?
5. Is the worker compensated by the fees they charge for their services less their expenses?
6. Is the worker free from your direction and control of quality and how work is done?

If the answer is “no” to more than one or two of these, then the person cannot be classified as independent contractor.  It would take, for example, a dental hygienist, to be legally able to offer their services directly to the public, providing the equipment, the instruments, the x-rays, all the paper goods, etc necessary to perform the services.  He/she would schedule their own patients or pay the person who schedules them. He/she would receive payment from the patient for services and then pay expenses, such as rent for the office space.  Does this happen??

Obviously, considering the above criteria, someone as independent as a dental hygienist cannot be considered an independent contractor.  What then?  You, as the employer, must:

1. Have the employee complete a W-4
2. Have the employee complete an I-9
3. Withhold federal withholding taxes
4. Withhold and match Social Security and Medicare taxes
5. Report the employee as a new hire to the state attorney general on the New Hire Report
6. Pay state and federal unemployment taxes
7. Pay the withholding, social security, and Medicare taxes
8. Send them a W-2 at the end of the year
9. Maintain that personnel file for a required number of years.

Whew!!!  That is a lot of work.  “What if I just need the person for one day?” you ask.  Length of time is not the criteria.  You must still do all of the above.

“What if I just take my chances?” you ask.  You may get away with it for awhile, but as many dentists have found out in the last few years because of the powerful cross checking capabilities of the IRS computers and Texas Workforce Commission, it is a strong possibility that at some point you will be chosen for a TWC or IRS audit.  Neither one is something you want to endure.  If the TWC comes in your office and finds discrepancies they are required to notify the IRS. THEN you will be responsible for paying all the taxes you did not pay, plus penalty and interest.

Your third choice is to use the services of a professional temporary service that takes responsibility for payroll. Yes, you will pay a little more, but part of the service you pay for is the personnel and accounting tasks. In the long run you have to factor the extra cost of doing all the required administrative tasks yourself. The service also takes the responsibility for any future unemployment claims or charge-backs from the Texas Workforce Commission.

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