Independent Contractor Checklist

independent contractor checklistMistakenly classifying an employee as an independent contractor can result in significant fines and penalties.
There are 20 factors used by the IRS to determine whether you have enough control over a worker
to be an employer. Though these rules are intended only as a guide — the IRS says the importance of each
factor depends on the individual circumstances — they should be helpful in determining whether you wield
enough control to show an employer-employee relationship. If you answer “Yes” to all of the first four
questions, you’re probably dealing with an independent contractor; “Yes” to any of questions 5 through 20
means your worker is probably an employee.

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  • Profit or loss. Can the worker make a profit or suffer a loss as a result of the work, aside from the
    money earned from the project? (This should involve real economic risk — not just the risk of not
    getting paid.)
  • … …

  • Investment. Does the worker have an investment in the equipment and facilities used to do the
    work? (The greater the investment, the more likely independent contractor status.)
  • … …

  • Works for more than one firm. Does the person work for more than one company at a time? (This
    tends to indicate independent contractor status, but isn’t conclusive since employees can also work
    for more than one employer.)
  • … …

  • Services offered to the general public. Does the worker offer services to the general public?
    … Instructions. Do you have the right to give the worker instructions about when, where, and how to
    work? (This shows control over the worker.)
  • ……

  • Training. Do you train the worker to do the job in a particular way? (Independent contractors are
    already trained.)
  • ……

  • Integration. Are the worker’s services so important to your business that they have become a
    necessary part of the business? (This may show that the worker is subject to your control.)
  • … …

  • Services rendered personally. Must the worker provide the services personally, as opposed to
    delegating tasks to someone else? (This indicates that you are interested in the methods employed,
    and not just the results.)
  • ……

  • Hiring assistants. Do you hire, supervise, and pay the worker’s assistants? (Independent contractors
    hire and pay their own staff.)
  • ……

  • Continuing relationship. Is there an ongoing relationship between the worker and yourself? (A
    relationship can be considered ongoing if services are performed frequently, but irregularly.)
  • ……

  • Work hours. Do you set the worker’s hours? (Independent contractors are masters of their own time.)
    ……

  • Full-time work. Must the worker spend all of his or her time on your job? (Independent contractors
    choose when and where they will work.)
  • …

  • … Work done on premises. Must the individual work on your premises, or do you control the route or
    location where the work must be performed? (Answering “no” doesn’t by itself mean independent
    contractor status.)
  • …

  • … Sequence. Do you have the right to determine the order in which services are performed? (This
    shows control over the worker.)
  • ……

  • Reports. Must the worker give you reports accounting for his or her actions? (This may show lack of
    independence.)
  • …

  • … Pay Schedules. Do you pay the worker by hour, week, or month? (Independent contractors are
    generally paid by the job or commission, although by industry practice, some are paid by the hour.)
  • ……

  • Expenses. Do you pay the worker’s business or travel costs? (This tends to show control.)
  • ……

  • Tools and materials. Do you provide the worker with equipment, tools, or materials? (Independent
    contractors generally supply the materials for the job and use their own tools and equipment.)
  • … …

  • Right to fire. Can you fire the worker? (An independent contractor can’t be fired without subjecting
    you to the risk of breach of contract lawsuit.)
  • ……

  • Worker’s right to quit. Can the worker quit at any time, without incurring liability? (An independent
    contractor has a legal obligation to complete the contract.)…