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:

TestDescriptionEmpl1099
InstructionsDoes the person for whom the services are performed have the right to require compliance with instructions? – Yes = Employee / No = Independent ContractorY?N
TrainingCan the person for whom the services are performed require attendance at training sessions? – Yes = Employee / No = Independent ContractorYN
IntegrationIs there an integration of the worker’s services into the business operations? – Yes = Employee / No = Independent ContractorYN
Services rendered personallyAre the services required to be performed personally? – Yes = Employee / No = Independent ContractorYN
Hiring, supervision, and paying assistantsDoes the person for whom services are performed hire, supervise or pay assistants? – Yes = Employee / No = Independent Contractor?Y?N
Continuing relationshipIs there a continuing relationship between the worker and the person whom the services are performed? – Yes = Employee / No = Independent ContractorY?N
Set hours of workIs there an establishment of set hours to be worked? – Yes = Employee / No = Independent ContractorY?N
Full time requiredMust the worker devote substantially full time to the business of the person for whom services are performed? – Yes = Employee / No = Independent ContractorY?N
Doing work on employer’s premisesIs 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 testMust the worker perform services in the order or sequence set by the person for whom services are performed? – Yes = Employee / No = Independent ContractorYN
Oral or written reportsIs there a requirement that the worker submit regular reports? – Yes = Employee / No = Independent ContractorYN
Payment by the hour, week, or monthIs payment by the hour, week, or month and not? payment by the job or a commission?? – Yes = Employee / No = Independent ContractorYN
Payment of business and/or traveling expensesDoes the person for whom the services are performed pay business or traveling expenses? – Yes = Employee / No = Independent ContractorYN
Furnishing tools and materialsDoes the person for whom the services are performed provide significant tools and materials for the worker? – Yes = Employee / No = Independent ContractorYN
Significant investmentWas there a significant investment in the facilities used by the worker? – Yes = Independent Contractor / No = EmployeeN?Y
Realization of profit or lossCan the worker realize a profit or suffer a loss as a result of the services? – Yes = Independent Contractor? / No = EmployeeN?Y
Working for more than one firm at a timeDoes the worker perform more than de minimis services for multiple firms at the same time? – Yes = Independent Contractor? / No = EmployeeN?Y
Making services available to the general publicDoes the worker make his/her services available to the public on a regular and consistent basis? – Yes = Independent Contractor? / No = EmployeeN?Y
Right to dischargeDoes the person for whom the services are performed have the right to discharge the worker? – Yes = Employee / No = Independent ContractorYN
Right to terminateDoes 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 ContractorYN