Do you follow the law?
Have you ever run across someone who says they are avoiding employment taxes by hiring their people as contract labor? In most such cases what they are doing is illegal. Aside from you and your family, there are two types of workers on your farm, employees and independent contractors. You do NOT get to choose how you will treat your workers. Federal law makes the choice for you. The question of who is an employee and who is an independent contractor is a matter of law. Internal Revenue Publication 15, The Employer’s Tax Guide, says in part: “Generally a worker who performs services for you is your employee if you have the right to control what will be done and how it will be done.” Most every farm employee falls into this category even if you give them a certain amount of freedom to make decisions. “Generally, people who are in business for themselves are not employees.” Your vet and your farrier are probably in business for themselves and are not employees. They are independent contractors.
Treating workers who are employees under the law as independent contractors is illegal and can result in large fines. Consult IRS Publication 15 for more details. Paying employment taxes is not that hard, and it does not cost a great deal. Besides, it’s the right thing to do.
