Independent Contractor or Employee?
Which is the right one?
The courts have considered many facts in deciding whether a worker is an independent contractor or an employee. These relevant facts fall into three main categories:
In each case, it is very important to consider all the facts – no single fact provides the answer. Carefully review the following definitions.
BEHAVIORAL CONTROL - These facts show whether there is a right to direct or control how the worker does the work. A worker is an employee when the business has the right to direct and control the worker. The business does not have to actually direct or control the way the work is done – as long as the employer has the right to direct and control the work. For example: Instructions – if you receive extensive instructions on how work is to be done, this suggests that you are an employee. Instructions can cover a wide range of topics, for example: How, when, or where to do the work, what tools or equipment to use what assistants to hire to help with the work, where to purchase supplies and services. If you receive less extensive instructions about what should be done, but not how it should be done, you may be an independent contractor. For instance, instructions about time and place may be less important than directions on how the work is performed with training about required procedures and methods, this indicates that the business wants the work done in a certain way, and this suggests that you may be an employee.
FINANCIAL CONTROL - These facts show whether there is a right to direct or control the business part of the work. For example: Significant Investment – if you have a significant investment in your work, you may be an independent contractor. While there is no precise dollar test, the investment must have substance. However, a significant investment is not necessary to be an independent contractor. Expenses – if you are not reimbursed for some or all business expenses, then you may be an independent contractor, especially if your unreimbursed business expenses are high. Opportunity for Profit or Loss – if you can realize a profit or incur a loss, this suggests that you are in business for yourself and that you may be an independent contractor.
Visit the IRS at, http://www.irs.gov/businesses/small/article/0,,id=99921,00.html for more detailed information on this subject.