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Draft Sample Independent Contractor Agreement

Wednesday, April 8th, 2009

Sample Independent Contractor Agreement

As a second part of the series I have provided below what a Sample Independent Contractor Agreement. Although a CPA is often the one who is best served to guide and direct an analytical and careful evaluation of the facts as presented. However care should be taken to have an attorney also be involved in drafting an Independent Contractor Agreement so that they might adequately address any intellectual property issues, confidentiality, ownership of all work products, etc.

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SAMPLE INDEPENDENT CONTRACTOR AGREEMENT

Contract made_________________, 20____,

Between _________________(Name of Corporation: hereinafter called Corporation) located

at_________________________________.

&_________________(Name of Contractor: hereinafter called Contractor) located at_________________________________.

In Consideration of the mutual promises set forth herein, it is agreed by and between Corporation and Contractor that:

Section One: Description of Services Performed by Contractor

The work to be performed by Contractor is in the Contractor’s usual line of business, including, but not limited to the following:

Contractor will provide services pursuant to customer’s needs, desires, and requests. The Contractor will ensure that all work performed is in accordance with customer’s standards and per customer’s request.
Contractor agrees to uphold standards of work and services that customer’s dictate and in accordance with professional standards.
Contractor agrees to provide services in accordance to deadlines and requests of customers.

Section Two: Payments

Payments will be made on a basis to Contractor at a rate of per __(project) performed. Contractor will summarize their billing by preparing an invoice to the Corporation. Monies calculated, as being owed, will be paid _days after they are presented to the Corporation.

Section Three: Relationship of the Parties

The parties intend that an Independent Contractor - Corporation relationship will be created by this contract and that said Contractor is not to be considered an employee of the Corporation for any purpose. The employee’s of the Contractor or Contractor are not entitled to any of the benefits that Corporation provides for Corporation’s employees. It is understood that Corporation does not agree to use Contractor exclusively. It is further understood that Contractor is free to contract for others owners or pursue any other business interests while under contact with the Corporation. The Independent Contractor hereby acknowledges that he or she is accountable for Independent Contractor’s own federal, state, and self employment income taxes and all liability and medical insurances and will not hold Corporation responsible for these or for any of the following including unemployment compensation, worker’s compensation, social security payments or for any other taxes or penalties associated with any failure on Contractor’s part to file any declarations or pay any monies due to any tax or licensing authority. The Independent Contractor acknowledges that he or she is to sign the attached W-9 certificate, acknowledging their independent contractor status, prior to issuance of any monies. The Contractor, as a separate business, is expected to conform and be solely responsible for all federal, state, and local licensing and reporting requirements. Contractor acknowledges that they are responsible for their own training and instruction. There are no required work schedules, sequences, written quotas, or production or sales reports. Contractor is responsible for all tools and supplies necessary to fulfill their contractual responsibilities.

Section Four: Liability

The work performed under this contract will be performed entirely at the Contractor’s risk. While Corporation assumes responsibility for its actions; the Contractor agrees to accept complete responsibility for any and all liability or loss arising in any way out of their performance of their responsibilities under this contract. These liabilities shall include but are not limited to purchases of tools and supplies as well as other business costs.

Section Five: Duration

Either party can cancel this contract at any time with or without cause on 30 days written notice so long as all:

1. All Balances are paid.

2. Proprietary materials are returned to their respective owners.

3. Existing contractual agreements/responsibilities are substantially resolved.

Section Six: Professional Standards

Contractor is expected at all times to show professionalism in the manner in which all aspects of the work performed. The Contractor is expected to provide these services on a timely convenient manner conducive to customer’s satisfaction. The Contractor is expected to maintain their finished work product and appearance in a manner, which will be in accordance with professional standards and as agreed. Contractor also agrees to perform services in accordance with professional standards and practices of the industry and all applicable federal and state laws.

Both parties hereby agree that the above information is accurate and truthful, and that a mutual understanding has been reached regarding the rules of Corporation and Contractor. This contract is to be followed and interpreted under the rules of the State of Georgia. If any part of this contract is declared null or void, the remaining parts will remain in full force and effect.

Contracts should then be signed and fully executed listing the name, address, titles and date signed by all parties concerned.

John Dillard is a Christian Speaker/Author and Certified Public Accountant (All Rights Reserved). To See how he takes Christ along with him to work visit http://www.hiscpa.com/ (An Atlanta CPA firm) and for his latest book Overcoming Life’s 9/11’s: Job’s Journey and to learn about his ministry visit http://www.john-dillard.com/ To contact John Dillard CPA (Atlanta Christian Author/Speaker) today call 770. 814.9304 proudly serving Duluth, GA, Gwinnett County and Beyond.

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What, then, shall we say in response to this? If God is for us, who can be against us? Romans 8:31

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Atlanta CPA Advises on How to Determine if Your Georgia Workers are Employees or Independent Contractors

Wednesday, April 8th, 2009

Atlanta CPA Advises on How to Determine if Your Georgia Workers are Employees or Independent Contractors

Tax law centers around proper classification of a worker as an employee or an independent contractor is often misunderstood exposing the employer/company at great legal and financial risk. The fact that you choose to pay someone as an independent contractor, when you treat them as an employee, will not preclude you from any and all payroll tax issues or those of a general liability nature. A careful review of the tax law, established guidelines, as well as a fair, independent and just review of your own facts and circumstances will more aptly enable you to correctly apply tax rules to the letter of the law and also its spirit. The issue of properly determining a worker’s classification centers on several major areas:

Control: Independent Contractors are chose to pick their own work path/procedures.

An employee may be told when, what and how to do the work to be done, whereas an independent contractor is predominately measured on the result and not the process. For example, if you have someone come into your office and perform tasks that you dictate, on your equipment, and basically at your leisure, he or she is most likely an employee.

Conversely, you might retain someone to do the same job but you do not care nor do you unduly influence her coming and goings, the specific steps, or how she performs her contracted job/task. Also if you are more concerned with the end product rather than how the work is completed then she is more apt to be an independent contractor. Often employees by definition and culture are not able to work for others while independent contractors are usually free to work with whomever they chose.

Risk of Loss: Independent Contractors, unlike employees, can lose money on a job.

An employee typically does not have a risk of loss as they usually will work at an employer’s office, using the employer’s equipment, and normally receive a hourly rate for their services rather than a stated fee for a completed task. An independent contractor however will usually have their own office, a business license, and their own equipment and supplies, which they utilize to perform tasks they contract with others to perform.

Thus they have the ability, by contracting for a fee in return for a completed product, to misjudge the time, energy, and effort required to complete a task and are thereby rewarded, like most business owners, on their ability to make a profit or loss on individual jobs. An employee, in being paid for their time and typically not their end result, however has no such daily exposure to loss.

An employer also typically will reimburse the expenses of an employee and pay for the medical and other fringe benefits whereas an independent contractor usually enjoys no such perks. An employee is typically paid hourly while an independent contractor is often paid a flat fee for a completed assigned task.

Behavioral Issues: Focusing on the end result rather than the process.

Employees usually will have set hours where they are expected to be at work whereas an independent contractor’s coming and goings are not regulated but only the timing of when an assigned task or work product is to be completed. An independent contractor’s relationship is generally shorter in nature than that of an employee who will often have a continuing relationship with their employer. Although a worker may quit at any time and an employer may terminate the relationship at will, an independent contractor may not be afforded such a luxury as often a independent contractor agreement will call for a contractual task to be completed. Often independent contractors will have a written contract, provide their own workers compensation and liability insurance, as well as decide on which specific tasks and responsibilities they will assume.

The Final Assessment

An unbiased review of these criteria and facts will help the employer make a wise and proper classification of a worker’s independent contractor status. There is no one over-riding criterion which will determine a worker’s proper status, however a careful review, and scrutiny of the facts will allow for a reasonable and just conclusion. A CPA is often the one who is best served to guide and direct an analytical and careful evaluation of the facts as presented. Also due consideration should be taken to have an attorney to also be involved in drafting an Independent Contractor Agreement so that they might adequately address any intellectual property issues, confidentiality and ownership of all work products.

Frequently you can change the way you are treating a worker to achieve the end result you are seeking. However, due care and diligence should be measured in this circumstance to be sure that you do not achieve one result while dramatically and negatively impacting your entire business operation and its profitability. Having a contract with an independent contractor is important because it specifically and clearly details the responsibilities of both parties. It will not be the determining factor in evaluation of their status as independent or controlled employee. For all employees whom you pay salaried wages or are due same, you will want to ensure that you follow all federal, state, and local taxing authorities so that you are not unduly surprised by additional penalties and interest at a later date.

Filing Requirements

Independent contractors if they are paid over a prescribed limit are required to receive a Form 1099 from their client which details the independent contractor’s business name, identifying number, address, and amount earned. This form serves, like a W-2 for employees, to notify the IRS of monies earned and taxable. A payroll service will be your most efficient and prudent resource to handle all of your employee’s W-2 filings and payments and Form 1099 issues. Tax law requires you to issue a Form 1099-Misc to all unincorporated independent contractors that you pay over $600 in any given calendar year. This form is to be issued to the independent contractor by January 31st of each year for the prior reporting period.

Determining correct worker status is often a tedious but yet essential and critical process. Whether you are in a crisis mode in the midst of an audit or just getting started ensuring that all of your workers are properly classified and that you maintain proper documentation is essential to sound business management. Stay tuned for our next posting providing an example of a sample independent contractor agreement.