by Andrew Schwartz, CPA

Last fall, my CPA firm helped out a client being audited about whether he should have been classified as an employee or as an independent contractor by the organization that was paying him.  In actuality, the client was being audited as an extension of the organization being audited.

However you look at it, we tried to show that this client should have been classified as an independent contractor even though the IRS thought he should be an employee.  To prove our case, we developed this table detailing the IRS’ 20 “employee versus independent contactors” tests, and simply tallied up the number of responses in each column:

Test Description Empl 1099
Instructions Does the person for whom the services are performed have the right to require compliance with instructions? – Yes = Employee / No = Independent Contractor Y  N
Training Can the person for whom the services are performed require attendance at training sessions? – Yes = Employee / No = Independent Contractor Y N
Integration Is there an integration of the worker’s services into the business operations? – Yes = Employee / No = Independent Contractor Y N
Services rendered personally Are the services required to be performed personally? – Yes = Employee / No = Independent Contractor Y N
Hiring, supervision, and paying assistants Does the person for whom services are performed hire, supervise or pay assistants? – Yes = Employee / No = Independent Contractor  Y  N
Continuing relationship Is there a continuing relationship between the worker and the person whom the services are performed? – Yes = Employee / No = Independent Contractor Y  N
Set hours of work Is there an establishment of set hours to be worked? – Yes = Employee / No = Independent Contractor Y  N
Full time required Must the worker devote substantially full time to the business of the person for whom services are performed? – Yes = Employee / No = Independent Contractor Y  N
Doing work on employer’s premises Is the work performed on the premises of the person for whom the services are performed? – Yes = Employee / No = Independent Contractor  Y  N
Order or sequence test Must the worker perform services in the order or sequence set by the person for whom services are performed? – Yes = Employee / No = Independent Contractor Y N
Oral or written reports Is there a requirement that the worker submit regular reports? – Yes = Employee / No = Independent Contractor Y N
Payment by the hour, week, or month Is payment by the hour, week, or month and not  payment by the job or a commission?  – Yes = Employee / No = Independent Contractor Y N
Payment of business and/or traveling expenses Does the person for whom the services are performed pay business or traveling expenses? – Yes = Employee / No = Independent Contractor Y N
Furnishing tools and materials Does the person for whom the services are performed provide significant tools and materials for the worker? – Yes = Employee / No = Independent Contractor Y N
Significant investment Was there a significant investment in the facilities used by the worker? – Yes = Independent Contractor / No = Employee N  Y
Realization of profit or loss Can the worker realize a profit or suffer a loss as a result of the services? – Yes = Independent Contractor  / No = Employee N  Y
Working for more than one firm at a time Does the worker perform more than de minimis services for multiple firms at the same time? – Yes = Independent Contractor  / No = Employee N  Y
Making services available to the general public Does the worker make his/her services available to the public on a regular and consistent basis? – Yes = Independent Contractor  / No = Employee N  Y
Right to discharge Does the person for whom the services are performed have the right to discharge the worker? – Yes = Employee / No = Independent Contractor Y N
Right to terminate Does the worker have the right to terminate the relationship with the person for whom the services are performed at any time without incurring a liability? – Yes = Employee / No = Independent Contractor Y N
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