IRS Independent Contractor Definition Useful Determination Info
Employers face a daunting question when they use independent contractors. When I was writing the previous article on the Top Five Questions we receive relating to workers’ compensation and taxation, I noticed new updates to the IRS Independent Contractor definition including answering the independent contractor/employee determination question. The IRS advice comes from a federal angle. Your individual state’s workers’ compensation system may have rules/regulations that could possibly vary somewhat.
This website has covered this subject many times in the past. We usually hear from employers the most on this subject – usually with a pending premium audit or one that was just performed by the premium auditor.
While reviewing the info to write this article, I discovered the IRS independent contractor definition pages were updated last week.
An excerpt from that page –
…whether these people are independent contractors or employees depends on the facts in each case.
The general rule is that an individual is an independent contractor if the payer has the right to control or direct only the result of the work and not what will be done and how it will be done.
You are not an independent contractor if you perform services that can be controlled by an employer (what will be done and how it will be done). This applies even if you are given freedom of action. What matters is that the employer has the legal right to control the details of how the services are performed.
The IRS Independent Contractor Definition is covered in Publication 15-A‘s main contents under #1. If inaccurate employee classifications exist at a business, the tax penalties including FICA can be very severe.
One place to delineate between the employee/independent contractor designation would be in the independent contractor agreement that was signed between you and the contractor. Googling independent contractor contracts will bring up hundreds of choices.
The standard IRS independent contractor definition concerns are covered in these blank contracts including the “control of work” question.