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FM-05
Independent Contractors SCORE Chapter 570 |
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I.R.S. Test For
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IRS has developed a 20 factor test to use as a guide in determining whether a worker is an employee or an independent contractor. These factors help ascertain whether sufficient control is present to establish an employer-employee relationship. The 20 factors are: |
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1. A worker required to comply with others
instructions of when, where and how to work is usually an employee. 2. Training a
worker indicates that services are to be performed in a particular method. 3. Integration
of a worker’s services into the business indicates control. 4. Services
to be rendered personally indicate control. 5. The right
to hire supervise and pay assistants shows control. 6. A
continuing relationship indicates an employment relationship. 7. Set hours
for the worker indicate control. 8. Full time
work indicates control. An independent contractor is free to work when and
for whom he/she chooses. 9. Work
performed on a business’s premises suggests control. 10. Requiring work to be performed in a set manner suggests
control. 11. A requirement that the worker submit regular or
written reports indicates control. 12. Payment by the hour, week, or month indicates an
employment relationship. 13. Payment of business expenses indicates an
employment relationship. 14. Furnishing of tools and equipment indicates an
Employment relationship. |
15. Investment by the worker in facilities indicates
an Independent contractor. 16. The ability to realize a profit or loss from services indicates an independent contractor. 17. Working for more than one firm at a time
indicates an independent contractor. 18. Services available to the general public on a
regular and consistent basis indicate an independent contractor. 19. The right to discharge a worker indicates an
employment relationship. 20. The workers right to terminate his relationship
without liability indicates an employment relationship. SEC 3004 - COMPLIANCE WITH STATUTORY
REQUIREMENTS TO AVOID EMPLOYEE TREATMENT 1. The
taxpayer does not treat the individual as an employee, and, 2. All
required federal tax returns (e.g., Form 1099 - Misc.) are filed by the
taxpayer on a basis consistent with the treatment of the individual as an
employee. 3. The
taxpayer has a reasonable basis (such as judicial precedent, published
filings, a letter from IRS, past its audit allowance, long standing industry
practice) for not treating the individual as an employee. SOURCE: RIA FEDERAL TAX HANDBOOK - Copied from November 2, 1995 Eastern
Pennsylvania SCORE District Meeting. |
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