Checklist for determining independent contractor status

Basically, an employer is one who controls and directs the performance of work, especially the details and means by which the work is done. The focus is on the means, not the results. It is crucial to analyze the facts and circumstances of each relationship. There are no fail-safe general rules for every situation.

The Internal Revenue Service has outlined 20 factors to provide guidance. The following checklist will assist you in determining if your worker is an independent contractor or not. If one or more of the following statements is true, the individual is in all probability an employee.

• The employer requires compliance with instructions as to when, where and how the work is to be performed.

• The employer provides formal or informal training.

• The worker is a part of the business operation. (The greater the business success is dependent upon the worker, the less likely the worker can be classified as an independent contractor).

• The employer has an interest in the methods used to accomplish the results.

• The employer can hire, supervise and pay other individuals to assist the worker or the worker can delegate work to others within the business.

• The relationship between the worker and the employer is a continuing one.

• The employer sets work hours for the worker.

• The worker devotes most or all of his or her working time to the employer's business.

• The worker must perform the work at the employer's worksite.

• The employer specifies the order in which work is done by the worker.

• The employer requires periodic written status reports.

• The worker is paid by the hour, week, or month.

• The employer pays the worker's travel or business expenses.

• The employer furnishes a significant amount of the tools, materials and/or equipment used by the worker.

The following factors indicate that a worker is probably an independent contractor.

• The worker has a significant investment in the worksite where the work is performed.

• The worker has profit opportunity and risk of loss for expenses incurred in the performance of the work.

• The worker must perform real work for more than one unrelated person or employer during the same time frame.

• The worker's services are made available to the general public on a regular and continuous basis.

• The worker cannot be terminated so long as the result produced meets contract specifications.

• The worker cannot quit without being liable for the work that was contracted for.

Employers should file informational returns (1099) for all independent contractors, and comply with state laws for workers' compensation and unemployment compensation.