This article provides a deeper dive into the specific characteristics that differentiate employees from independent contractors based on IRS guidelines.
Employee Characteristics
Workers are generally considered employees if they:
- Must comply with employer's instructions about when, where, and how to work.
- Receive training from the employer.
- Provide services that are integrated into the business operations.
- Render services personally.
- Have a continuing relationship with the employer.
- Keep set hours of work.
- Work full-time for the employer.
- Work on the employer's premises.
- Are paid by the hour, week, or month.
Independent Contractor Characteristics
Workers are generally considered independent contractors if they:
- Hire, supervise, and pay their own assistants.
- Set their own hours.
- Work for multiple firms at the same time.
- Make their services available to the general public.
- Are paid by the job or on a commission basis.
- Can realize a profit or loss from the work.
- Furnish their own tools and materials.
- Have a significant investment in their facilities/equipment.
The Consequences
Misclassification can lead to steep penalties, including payment of back taxes, interest, and fines. If you are unsure, you can file Form SS-8 with the IRS to get an official determination of worker status.