From the Amarillo Globe-News —
“The IRS advises the relationship of the worker and the business must be examined in order to determine whether an individual is an employee or an independent contractor under the common law. In any employee-independent contractor determination, all information that provides evidence of the degree of control and the degree of independence must be considered. Facts that provide evidence of the degree of control and independence fall into three categories: behavioral control, financial control, and the type of relationship of the parties. Below are factors the IRS recommends employers consider when making the “independent contractor” versus “employer” determination:
1. Behavioral Control
- Is the person subject to the business’ instructions about when, where, and how to work?
- Is the person trained to perform services in a particular manner? Independent contractors ordinarily use their own methods.
2. Financial Control
- Independent contractors are more likely to have unreimbursed expenses than are employees.
- An independent contractor often has a significant investment in the facilities or tools he or she uses in performing services for someone else. However, depending on the type of work the contractor completes, these investments need not be significant.
- An independent contractor is generally free to seek out business opportunities. Independent contractors often advertise, maintain a visible business location, and are available to work in the relevant market.
- An employee is generally guaranteed a regular wage amount for an hourly, weekly, or other period of time.
- Independent contractors are more likely to realize a profit or loss.
3. Type of Relationship of the Parties
- Does a written contract exist describing the relationship the parties intended to create?
- Does the business provide the worker with employee-type benefits, such as insurance, a pension plan, vacation pay, or sick pay?
- Is this a permanent relationship?
- What extent of the services performed are key aspects of the company’s regular business?
The above is not an exhaustive review of the IRS guidance, but rather is intended to give employers an idea of the type of factors considered when classifications are reviewed for federal taxation purposes..,”
Read the full story at “Independent Contractor” vs. “Employee” – Has Your Company Made the Right Call?
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- Employee vs. Independent Contractor Classification (minnesotaattorney.com)
- The Tax Risks of Misclassifying Employees – The National Law Review (natlawreview.com)
- The Independent Contractor (urberglaw.wordpress.com)