What does the IRS consider in determining whether a worker is an employee or an independent contractor?

The IRS occupies a place like EF Hutton used to:  When it speaks, people listen.

So it is nice to know what the IRS cares about when considering whether a worker is an independent contractor or an employee. The IRS cares a lot about the degree of control a business has over the work in determining the independent contractor vs. employee question.  Consider the following from the IRS website:
In determining whether the person providing service is an employee or an independent contractor, all information that provides evidence of the degree of control and independence must be considered.

The Common Law Rules

Common law generally means there is no statute or formal rule that sets it out, it is based on the decisions of the courts. The IRS says “Facts that provide evidence of the degree of control and independence fall into three categories:
  1. Behavioral: Does the company control or have the right to control what the worker does and how the worker does his or her job?
  2. Financial: Are the business aspects of the worker’s job controlled by the payer? (these include things like how worker is paid, whether expenses are reimbursed, who provides tools/supplies, etc.)
  3. Type of Relationship: Are there written contracts or employee type benefits (i.e. pension plan, insurance, vacation pay, etc.)? Will the relationship continue and is the work performed a key aspect of the business?
The IRS says this about what businesses should consider in making the independent contractor versus employee distinction:
The IRS provides additional guidance here.  If you are an Oklahoma employer or worker, this material is worth a look.

Shawn Roberts

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I write about and try to answer practical Oklahoma legal questions. I tend to focus on estate planning and business issues. I make a living as an attorney working for Resolution Legal Group in Oklahoma City. I am husband to Amy and the father of Sam and David. We live exactly in the path where the "wind comes sweeping down the plains."