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

Hiring Employees as Independent Contractors in Wisconsin

It is important to correctly classify workers as either employees or independent contractors in Wisconsin. Misclassifying workers can result in penalties and legal consequences.

To classify a worker as an independent contractor in Wisconsin, the following requirements must be met:

  1. The worker must be free from the control or direction of the employer in the performance of the work, both under the contract for the performance of the work and in fact.
  2. The worker must perform work that is outside the usual course of the employer’s business.
  3. The worker must be customarily engaged in an independently established trade, occupation, profession, or business of the same nature as that involved in the work performed.

If these requirements are not met, the worker should be classified as an employee.

Tax Implications of Hiring Independent Contractors

While hiring independent contractors may save money on certain taxes, it is important to note that misclassifying employees as independent contractors can result in penalties and legal consequences. Employers are required to pay certain taxes for employees, such as Social Security and Medicare taxes, and may be required to provide benefits such as workers’ compensation insurance. Independent contractors are responsible for paying their own taxes and providing their own benefits.

It is important to consult with a legal or tax professional to ensure proper classification of workers and compliance with all applicable laws and regulations. Additionally, it is important to note that Wisconsin has a tax avoidance transactions voluntary compliance program [1.2] and imposes an additional tax on tax-option corporations [1.3].

[1.1][1.2][1.3][1.4]

Source(s):
Jurisdiction

Wisconsin