Business
Independent Contractor vs. Employee for
IRS Purposes
To determine whether a worker is an
independent contractor or an employee under common law, you must examine
the relationship between the worker and the business. All evidence of
control and independence in this relationship should be considered. The
facts the provide this evidence fall into three categories:
• Behavioral control
• Financial control
• Type of relationship itself
Behavioral Control covers facts that show whether the business
has the right to direct and control how the work is done through
instructions, training, or other means.
Financial Control covers facts that show whether the business has
the right to control the financial and business aspects of the worker’s
job. This includes:
• The extent to which the worker has unreimbursed business expenses.
• The extent of the workers investment in the facilities used in
performing services.
• The extent to which the worker makes his or her services available to
the relevant market.
• How the business pays the worker, and
• The extend to which the worker can realize a profit or incur a loss.
Type of Relationship includes:
• Written contracts describing the relationship the parties intended to
create.
• The extend to which the worker is available to perform services for
other, similar businesses.
• Whether the business provides the worker with employee-type benefits,
such as insurance, a pension plan, vacation pay, or sick pay.
• The permanency of the relationship, and
• The extent to which services performed by the worker is a key aspect
of the regular business of the company.
It is imperative you use the proper classification for subcontractors.
Call us to set up an appointment.
|
American Institute of Certified Public Accountants (AICPA) |
Colorado Society of Certified Public Accountants
|
National Association of Tax Professionals |
|
Karen L Boor CPA, LLC
Phone (303) 637-9777 ● Fax (303) 659-1954
29500 Great Rock Rd,
Brighton, CO 80603
Copyright ©
Karen L Boor CPA LLC 2008 |
