From QuickBooks, Susan Solovic describes how to determine if a workers is an employee or independent contractor and shares advice on how to protect your business from allegations of misclassification. Susan writes:
How to Determine If Your Worker Is a Contractor
Various state and federal agencies and taxing authorities have a variety of tests to determine whether a worker is properly classified as an independent contractor or not. The most commonly recognized assessment is the IRS’s 20-factor test, most of which is listed below. I’ve only included some of the highlights so you can get an idea about the criteria these agencies consider when making a determination.
To be classified as an independent contractor, the individual must:
- Have the ability to set his/her own hours and do the job in his/her own way.
- Have the ability to use his/her own methods as opposed to being required to undergo training from the purchaser of his/her services.
- Accept a risk. In other words, he/she can earn a profit or suffer a loss from the activity.
- Be able to assign others to do the job and is not required to do it personally.
- Be hired for one job and not have a continuing relationship with the company.
- Have more than one client at a time.
- Must pay his/her own business and traveling expenses. NOTE: The employer may later reimburse him/her for those expenses.
- Not work on the employer’s premises and use his/her own office, desk and equipment.
- Be paid on a commission basis or on a per-project basis rather than by the hour, week or month.
- Must agree to complete a specific job and be responsible for the satisfactory completion, or he/she is obligated to make good for any failure.
Read the full story at What You Need to Know About Independent Contractors to Protect Your Business
