When it comes to determining whether someone is an independent contractor, there are several factors that the IRS takes into consideration. These factors are used to determine the worker`s classification and if they are eligible to receive certain benefits and protections under federal law.
Here are some of the key factors that the IRS uses to determine whether someone is an independent contractor or not:
1. Control: One of the primary factors that the IRS uses to determine whether someone is an independent contractor is the level of control that the employer has over the worker. If the employer has a significant amount of control over the worker`s hours, tasks, and methods of performing job duties, the worker may be classified as an employee rather than an independent contractor.
2. Financial relationship: The IRS also looks at the financial relationship between the worker and the employer. Independent contractors typically work on a project-by-project basis and are paid a flat fee or hourly rate. If the worker receives regular, ongoing payments from the employer, they may be classified as an employee.
3. Equipment and supplies: Another factor that the IRS looks at is whether the worker provides their own equipment and supplies. Independent contractors usually provide their own tools, equipment, and supplies to complete their work, while employees are often provided with these items by the employer.
4. Degree of skill: The IRS also considers the worker`s degree of skill and expertise when determining whether they are an independent contractor or employee. If the work being performed requires a high level of skill or expertise, the worker is more likely to be classified as an independent contractor.
5. Relationship: Finally, the IRS looks at the overall relationship between the worker and the employer. Independent contractors are typically hired for a specific project or task, while employees are part of an ongoing, long-term employment relationship.
In summary, the IRS uses a combination of factors to determine whether someone is an independent contractor or employee. By looking at the level of control, financial relationship, equipment and supplies, degree of skill, and overall relationship between the worker and employer, the IRS can make an informed decision about the worker`s classification. Understanding these factors can help both employers and workers ensure that they are classified correctly under federal law.