Employee or Independent Contractor?

The IRS looks at three factors to determine how workers should be classified.

1. The behavioral test focuses on whether the company controls or has the right to control what the worker does and how to do the job. If so, the worker is an employee. This includes the instructions about performing the work, evaluation criteria and training
2. The financial test looks at who controls the economics of the worker's job. Factors favoring employee status include eligibility for reimbursement of travel and payment based on hours worked. Providing your own tools needed for the job is indicative of contractor status, as is being able to work for more than one firm.
3. The type of relationship test. Evidence of an employer-employee setup includes giving paid time off and retirement benefits, as well as hiring the worker to render services indefinitely rather than for a specific project. A written contract stating that the worker will be treated as an independent contractor isn't determinative.

f you have any questions about this or any other accounting related topic, please do not hesitate to contact us here at Shein & Wente CPA in Melbourne, Florida!