If I call my worker an independent contractor, that's good enough ... right?

No.  Unfortunately, it is not.  Both federal and state governments look closely as to how a worker is classified.  Understandably, the driving focus is money.  An employer need not withhold or pay taxes (including expensive payroll taxes such as Social Security and Medicare) for an independent contractor, and it will have fewer legal obligations to an independent contractor than to an employee.  As such, it is appealing to label a worker an independent contractor.  However, it is not that simple.  There are many tests to determine whether a worker qualifies as an independent contractor.

Figuring out how to classify and treat so as to avoid agency investigation and audits can be a complicated undertaking.  There are numerous agencies involved with the investigation of misclassified workers.  These include the IRS, The U.S. Department of Labor, the state unemployment compensation board, the state's workers' compensation insurance agency, the state tax department, and the state department of labor.  To avoid problems such as audits, fines, and taxes, you should learn the rules of all of the following agencies before you hire a worker.

PRACTICE TIP:  Some of the strategies to avoid problems include hiring incorporated independent contractors, not exercising control over independent contractors, and using an employee leasing company.  Consult an employment attorney to review your individual work situation.