On the crucial question of whether a worker is an employee or an independent contractor, you had better answer correctly. Otherwise, expect scrutiny from the IRS, which monitors worker status to make sure Uncle Sam collects all taxes due.
Conferring contractor status on a worker benefits the employer, which then doesn’t have to withhold income tax or pay Social Security and unemployment taxes.
The IRS looks at three broad categories of information to decide whether someone is an employee or a contractor. You can use them, too, to make sure you are in compliance with the law.
1. Behavioral control
Behavioral control focuses on whether the business has the right to direct or control how the work is done—e.g., how the worker performs the specific task for which he was hired. Factors include:
- To what extent are instructions given and taken? An employee is generally subject to the business’s instructions about when, where and ho...(register to read more)