Court: Employee vs. independent contractor

The court has spoken again on the issue of employee vs. independent contractor. A worker hired by a business that provided home and other care services to adults with disabilities was determined to be an employee although the business treated him as an independent contractor. The Tax Court analyzed the critical factors in the work relationship and determined that he was a common law employee not liable for self-employment tax. The court found that the facts in six of seven factors indicated employee status, including that:
• the employer exercised a high degree of control over the work,
• the employee had no out-of-pocket costs relating to his work,
• he was paid an hourly rate and had no other opportunity for profit or risk of loss in the business,
• the business retained the right to discharge the worker,
• the work performed was an integral part of the regular business, and
• the work relationship in practice was ongoing and not thought to be temporary or short-term.
While issuance of a Form 1099-MISC indicated that the business intended him to be an independent contractor, the court noted that the business was not a disinterested party because in claiming IC status they avoid the necessity of filing employment tax returns and paying employment taxes, and therefore the worker was an employee.
Debbie Mueggenborg is a CPA and partner with Archambo &Mueggenborg Pc in Bartlesville. She can be reached at debbie@archambofinancial.com or by phone at 918-336-0008.

See Court: Employee vs. independent contractor.