Mistakenly 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.
money earned from the project? (This should involve real economic risk — not just the risk of not
getting paid.)
work? (The greater the investment, the more likely independent contractor status.)
tends to indicate independent contractor status, but isn’t conclusive since employees can also work
for more than one employer.)
Instructions. Do you have the right to give the worker instructions about when, where, and how to
work? (This shows control over the worker.)
already trained.)
necessary part of the business? (This may show that the worker is subject to your control.)
delegating tasks to someone else? (This indicates that you are interested in the methods employed,
and not just the results.)
hire and pay their own staff.)
relationship can be considered ongoing if services are performed frequently, but irregularly.)
choose when and where they will work.)
location where the work must be performed? (Answering “no” doesn’t by itself mean independent
contractor status.)
shows control over the worker.)
independence.)
generally paid by the job or commission, although by industry practice, some are paid by the hour.)
contractors generally supply the materials for the job and use their own tools and equipment.)
you to the risk of breach of contract lawsuit.)
contractor has a legal obligation to complete the contract.)