Independent contractor according to IRS

Here are twenty rules that differentiate between an employee and a contractor. Paraphrasing has been used for brevity. You and/or your financial/tax/payroll staff and advisors should refer to the actual IRS ruling and language.

1. Instructions: If a worker must comply with when, where, and how to conduct the work, that is usually an employee.

2. Training: If the worker has to be trained by the company, that is usually seen as an employment relationship.

3. Integration: If the worker's activity is integrated into the operation, this demonstrates direction and control, and is usually seen as employment rather than contract.

4. Services rendered personally: If the services must be personally rendered by the worker, then this is usually seen as an employment relationship.

5. Hiring, supervising, and paying assistants: If the hiring company or person also hires, fires, and pays assistants, that activity is seen as control by the hirer, and is usually seen as an employment relationship.

6. Continuing relationship: The continuity of the relationship between the hiring company or individual and the provider of services may indicate an employment relationship, rather than a contract relationship.

7. Set hours of work: This indicates an act of control. Control is typically seen as a function of an employer.

8. Full time required: When a worker must devote substantial, full time efforts to the business of the company or person receiving the services, this indicates an employment relationship.

9. Order or sequence set: If the receiver of services sets the order or sequence, they are typically viewed as an employer of the service provider. Again, this is viewed as an issue of control over how work is performed.

10. Oral or written reports: Requirement of reporting indicates employment control.

11. Payment by hour, week, month: How a worker is paid can indicate the nature of the relationship, whether employment or contract.

12. Work done on premises: Employees usually do all work on the premises of the receiver of services. This may be a tricky one in the case of teleworkers.

13. Payment of expenses: Employers usually pay the expenses of employees, while contractors typically pay their own,. Contractors may be reimbursed at the end of the assignment.

14. Tools and material: Employers typically provide tools and materials to employees, while contractors usually provide their own.

15. Significant investment: Employees typically do not invest in the facilities they work in.

16. Realization of profit or loss: A worker who has the potential to profit or lose from the delivery of a service is typically not seen as an employee.

17. Working for more than one firm: A worker who delivers significant services to more than one unrelated firm or person in the same period is typically not seen as an employee.

18. Right to discharge: The ability to fire a worker is seen as an employment relationship.

19. Making services available to general public: Availability of services to the general public is seen in independent contractors.

20. Right to terminate: The right to quit is seen as that of an employee.