I got yet another call yesterday about how to pay staff working as independent contractors. While the person who called me is very likely to be be able to use ICs in her business, it seems that most spa owners (and related businesses) who have independent contractors rather than employees are probably in violation of the law.

Here's a quote from an article on Massage Today.com entitled Success and the IRS (March 2006) but I think the points are still valid. "The penalties for this violation are severe and can equal 100% of the tax that should have been withheld, or more....The reality is that, in this business, it's estimated that up to 99% of spa and wellness center owners with booth rentals or independent contractors would not pass an IRS audit. " Click here to read the whole article.

Again, if you are using independent contractor in your business, you must take an honest look at your business and how you treat your staff to be sure you fit the guidelines. Otherwise you may be facing some stiff penalties that could jeopardize your entire operation.