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Are you thinking about hiring your first (or next) contract attorney? How can you be sure that he or she is actually an independent contractor and not an employee? The IRS has compiled a list that can help.
Misclassifying your worker as an independent contractor can lead to some dire consequences. In one case, a law firm had to pay $160,000 when it failed to prove that its so-called "contract" attorneys were truly independent contractors, according to the Oregon State Bar.
So, while hiring a contract attorney may seem like a good idea in these penny-pinching times, you'll want to be careful in how you treat and classify them:
IRS Says: Focus on Control
The IRS has compiled a list of 20 factors derived on a case-by-case basis over the years in determining what type of relationship exists among the employer and worker. While the list is not exhaustive, it does focus on one key factor: control.
The more control an employer has over a worker, the more likely it is that the worker is an employee. In other words, the more control you have over your contract attorney, the more likely he or she might have grounds to claim employee status (and all the benefits that come with it).
Here are some factors that the IRS thinks are relevant:
These are just a few of the many factors that the IRS considers when figuring out if a contract attorney is really an independent contractor, so use your best lawyerly judgment. The IRS can come after anyone, whether you're hiring contract attorneys or lap dancers, so make sure that you're careful with your contract hires.
Have questions about your workers' legal classification? Tweet it to us @FindLawLP.