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Can I hire employees as independent contractors to save money on taxes in Ohio? What are the requirements?

To classify workers as independent contractors in Ohio, they must meet specific requirements related to control and direction, trade or business, and nature of services provided. While hiring independent contractors may save money on taxes, it is important to ensure that the workers are properly classified to avoid potential penalties.

Requirements for Independent Contractors in Ohio

To classify a worker as an independent contractor in Ohio, the following requirements must be met [4.1]:

  • The worker must be free from control and direction in the performance of their services.
  • The worker must be engaged in an independently established trade, occupation, profession, or business.
  • The worker must be customarily engaged in an independently established trade, occupation, profession, or business of the same nature as the service being provided.

If these requirements are not met, the worker may be considered an employee and the employer may be responsible for paying taxes and providing benefits.

Tax Implications of Hiring Independent Contractors

While hiring independent contractors may save money on taxes, it is important to ensure that the workers meet the requirements for independent contractor status. If the workers are misclassified, the employer may be responsible for paying back taxes and penalties [4.1].

Additionally, contractors and subcontractors on public improvement projects in Ohio are required to supply the prevailing wage coordinator with all documentation required by law [2.1]. Ohio also offers tax credits for businesses that foster new jobs in the state [3.2]. These credits are available for businesses that create new jobs and meet certain requirements. It is important to review the specific requirements for these credits to determine if they are applicable to your business.

Relocation of Employees

If you are relocating a substantial number of employment positions from other operations elsewhere in the state to the project site, you must notify the legislative authority of the county(s), township(s), or municipal corporation(s) from which the relocated employment positions are to be moved prior to the relocation of such employment positions [5.1].

In summary, to classify workers as independent contractors in Ohio, they must meet specific requirements related to control and direction, trade or business, and nature of services provided. While hiring independent contractors may save money on taxes, it is important to ensure that the workers are properly classified to avoid potential penalties. Additionally, contractors and subcontractors on public improvement projects in Ohio are required to supply the prevailing wage coordinator with all documentation required by law, and Ohio offers tax credits for businesses that create new jobs and meet certain requirements. If you are relocating a substantial number of employment positions from other operations elsewhere in the state to the project site, you must notify the legislative authority of the county(s), township(s), or municipal corporation(s) from which the relocated employment positions are to be moved prior to the relocation of such employment positions.

Source(s):
Jurisdiction

Ohio