Is it acceptable to the IRS for an employee to be hired also as an independent contractor to do support work for a company (ie, sales and data entry)? The support work is most definitely independent contractor work according to the IRS requirements - the question is whether an employee of the company can be hired to do the work on their own time and as part of their own side businesses.
USA Independent Contractor/Employee
- Thread starter tconn1
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I think that this is acceptable as long as the two jobs are segregated through payroll, management, etc. As long as the employee is paid and registered in the HR system as both an employee and a contractor I don't believe that the IRS would have any issue with it.
Tconn1 - I suggest you read IRS Publication 15 A - just the section that distinguishes an employee from a contractor. Very roughly boils down to how much detail is up to the employer as to the job specifics. For example: "Build a new building" = contractor but "do the data entry this way" = employee.
There should be no reason that an employee cannot also be hired as an independent contractor.
For example, Bob is a salaried or hourly employee who works full time in the accounting department of Company X. Bob also develops websites for small businesses at night and on weekends at his home using his own computer and internet connection. Company X hires Bob to develop a website for $5,000. Company X maintains no control over how and when Bob works on the website or what software tools he uses to accomplish the job. Assuming that Bob would be treated as an independent contractor if he had no other relationship with Company X, the mere fact that he is an employee with respect to his day job should not color the relationship on his services to build the website.
HOWEVER, it is likely that sending both a W-2 and a 1099-MISC to the same individual will trigger an IRS audit to determine whether a misclassification exists. If a company is going to hire an employee as an independent contractor, it should be very certain that the relationship will pass close scrutiny under the IRS' employee vs. independent contractor test.
For example, Bob is a salaried or hourly employee who works full time in the accounting department of Company X. Bob also develops websites for small businesses at night and on weekends at his home using his own computer and internet connection. Company X hires Bob to develop a website for $5,000. Company X maintains no control over how and when Bob works on the website or what software tools he uses to accomplish the job. Assuming that Bob would be treated as an independent contractor if he had no other relationship with Company X, the mere fact that he is an employee with respect to his day job should not color the relationship on his services to build the website.
HOWEVER, it is likely that sending both a W-2 and a 1099-MISC to the same individual will trigger an IRS audit to determine whether a misclassification exists. If a company is going to hire an employee as an independent contractor, it should be very certain that the relationship will pass close scrutiny under the IRS' employee vs. independent contractor test.