Are Your Salespeople Independent Contractors or Employees?

This time of year when 1099 and W-2 reporting are being done, the question of who is or who should be an employee versus an independent contractor often arises. This is especially true for new home salespeople and Realtors. However, Congress and the IRS have made this sometimes murky picture quite clear.

Rather than applying the usual tests that the IRS has for determining whether someone is an employee or independent contractor, the law simply states that 2 types of professions (direct sales and real estate sales) are defined as "statutory nonemployees." This means that they are considered to be self-employed independent contractors for federal income tax purposes.

There are a couple of guidelines you need to be aware of and make sure you follow, but it appears that you can choose to have employees on your payroll or independent salespeople - without paying benefits - whom you can require by separate agreement to attend sales meetings, staff your sales office, and maintain customer contact without being concerned that you have not maintained their independent contractor status.

For more information, visit Independent Contractors vs. Employees.