Are Your Martial Arts Assistant Instructors Employees?

Keep Your Guard Up

One of the common errors a new martial arts school owner often makes is to classify a staff member as an independent contractor instead of an employee. The difference is significant.

An employee must have income tax and social security deducted from his check. The social security must then be matched by the employer.

Here’s the error. If you are not making those deductions, then at the end of the year you must issue your worker a 1099 form which indicates the total money paid to the worker by you for the year. The worker must then pay taxes on the total.

 This can be a major shock to a staff member who is not prepared for the tax hit. If it is an ex-staff member, they may file for unemployment which will result in an immediate investigation of your worker classification arrangements.

The investigation will determine if workers should be classified as employees or independent contractors. If your independent contractors are reclassified as employees, you could be liable for back taxes and penalties. 

This simple error can kill a business. We know of one aerobics instructor whose very successful business was closed after she was hit with six-figures in back taxes and penalties for her instructors.

Don’t let this happen to you.

Workers are considered employees if they:

  1. Must comply with the employers instructions about the work
  2. Receive training from or at the direction of the employer                              
  3. Provide services that are integrated into the business
  4. Provide services that must be rendered personally
  5. Are aided by assistants who are hired, supervised and paid by the employer
  6. Have a continuing working relationship with the employer
  7. Must follow set hours of work
  8. Work full-time for an employer
  9. Do their work at the employers premises
  10. Must work in a sequence set by the employer
  11. Must submit regular reports to the employer
  12. Are paid in regular amounts at set intervals
  13. Receive payments for business or traveling expenses
  14. Rely on the employer to furnish tools and materials
  15. Lack a major investment in the facilities or equipment used
  16. Cannot make a profit or suffer a loss from their services
  17. Work for one employer at a time
  18. Do not offer their services to the public
  19. Can be fired by the employer
  20. May quit work at any time without incurring liability