Determining the Status of an Independent Contractor and Taxes Essay

Determining the Status of an Independent Contractor and Taxes - Essay ExampleAvoiding taxes is non the primary goal of an independent contractile organ but they agnise if they are classified as employees they suffer some consequences. Some of the consequences one suffers are that they might not be hired by the hiring firm since they these firms ordain be forced to pay additional expenses of treating them as employees. The aims of the firms to maximise their profit and to ensure they achieve their goals, they have to ensure that they minimise their operational expenses. For this slick, if an independent contractor is classified as an employee he will never be hired by the hiring firms. (Fishman, 2006)The other reason as to why the independent contractors do not need to be classified as employees is because they will add additional tax burden to themselves by creation subjected to tax. Their pay will be deducted, something they would not be experiencing if they were independent co ntractor. (Fishman, 2006)According to Fishman (1997), the U.S Bureau of Labour Statistics shows that in U.S.A alone, there are eight million independent contractors and in the next ten years, this hail is expected to double.The use of independent contractors is beneficial companies that cannot afford to hire permanent employees especially small and medium ones. This is especially so for those companies that can not be able to employ a permanent employee for narrow function. For instance, a company engaged in international commerce can hire an attorney who has specialized in international trade as an independent contractor to provide international legal advice. This staffing approach is more affordable than employee a permanent employee and for this case due to the fact that this attorneys salary will not be taxed, then it does not mean he want to avoid paying the tax. 1 ineradicable employees have been given a great deal of job security by European laws and because of these laws, the economic uncertainty has forced employers to use short-term contracts than victimisation permanent participation. These short-term contracts are the use of independent contract and statistics shows that this tread is on the increase. In every five employees in France, one is on interim contract 30 percent of workforce in Britain is on temporary employment in Spain, for every ten jobs created, seven of them are on temporary basis and the ban on private temporary employment agencies has been lifted in Germany. These statistics shows that there is great rise in the use of independent contractors in many European countries. The use of independent contractors has become popular since it reduces costs and legal requirements imposed on termination or lay off of employment in Europe. Due to the fact that the temporary employees hired by companies under temporary employment does not mean that they are avoiding paying taxes since they employment is being dictated by circumstances. (Te mpleman, 1996)Independent contractors results in cost savings which include reduced book keeping and payroll preparations costs, avoidance of taxes, reduced fringe benefits, riddance of workers compensation benefits, elimination of overtime pay, decreased administrative burdens and reduction in capital and maintenance costs if the independent contractors provides their own tools and equipment. (Bureau of National Affairs, 1994 Stalnaker, 1993).Even though independent contr