The Internal Revenue Service uses these common-law factors to determine whether a worker is an independent contractor or a regular employee:

1. Instructions. An employer should not tell an independent contractor how to do a job.
2. Training. An employer should not provide substantial training for an independent contractor.
3. Integration. An independent contractor should not be hired to provide a service that is an essential part of an employer’s business.
4. Personal Services. An employer should not insist that the work be performed by the contractor rather than someone that the contractor might hire.
5. Assistants. Independent contractors control and pay their assistants.
6. Length of Relationship. Independent contractors should not have a continuing relationship with an employer unless there are multiple contracts.
7. Work Hours. An independent contractor usually determines the hours worked to complete a job.
8. Amount of Work. An independent contractor should not be told to work full time for an employer if that would prevent the contractor from doing other work.
9. Location. Unless the services can be performed only in one location, an independent contractor chooses where to do the work.
10. Sequence of Work. Independent contractors determine the order in which they accomplish their tasks.
11. Reports. Independent contractors should not be required to produce interim reports.
12. Payment. Independent contractors are paid for the results of their work, not for the time worked.
13. Expenses. Independent contractors are responsible for their business expenses.
14. Tools. Independent contractors typically provide their equipment and tools.
15. Investment. An independent contractor has a significant investment in his business, such as a home office.
16. Profit. Independent contractors can realize profits and incur losses.
17. Multiple jobs. Independent contractors can work for more than one employer at a time.
18. Availability. Independent contractors make their services available to the general public.
19. Termination. Independent contractors cannot be fired at will, as can employees.
20. Liability. Independent contractors are liable for failure to complete a job.

Posted July 2, 2008 by Kevin Gramian at Optimum Outsourcing.

This entry was posted on Wednesday, July 2nd, 2008 at 2:23 pm and is filed under Government Compliance. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.