Independent Contractor Misclassification
In
February, 2010, the IRS launched a nationwide initiative to examine 6,000
random companies nationwide in an effort to crack down on the misclassification
of 1099 contract workers. Since it’s the employer’s responsibility to ensure contractors
and employees are properly classified, it’s important to know you've done your
due diligence to prevent placing your business at risk.
Express Employment Professionals has developed an informative webinar specifically designed to address the Independent Contractor (1099 employees). This webinar will focus on the proper classification
of contract workers, the consequences of misclassification, and what
documentation you need to protect your business. As you’ll learn in the
video, New York State has this high on their radar screen.
View
the webinar (running time - 10:44)
You
can view the Twenty Factor
Test via the IRS website. Pages 3-5 provide more details on the
test, but for your convenience, I have copied and pasted for you below.
The 20 factors identified by the
IRS:
1. Instructions: If
the person for whom the services are performed has the right to require
compliance with instructions, this indicates employee status.
2. Training: Worker
training (e.g., by requiring attendance at training sessions) indicates that
the person for whom services are performed wants the services performed in a
particular manner (which indicates employee status).
3. Integration: Integration
of the worker’s services into the business operations of the person for whom
services are performed is an indication of employee status.
4. Services rendered personally:
If the services are required to be performed personally, this is an indication
that the person for whom services are performed is interested in the methods used
to accomplish the work (which indicates employee status).
5. Hiring, supervision, and
paying assistants: If the person for whom services are
performed hires, supervises or pays assistants, this generally indicates
employee.
6. Continuing relationship: A
continuing relationship between the worker and the person for whom the services
are performed indicates employee status.
7. Set hours of work: The
establishment of set hours for the worker indicates employee status.
8. Full time required: If
the worker must devote substantially full time to the business of the person
for whom services are performed, this indicates employee status. An independent contractor is free to
work when and for whom he or she chooses.
9. Doing work on employer’s
premises: If the work is performed on the premises of the
person for whom the services are performed, this indicates employee status,
especially if the work could be done elsewhere.
10. Order or sequence test:
If a worker must perform services in the order or sequence set by the person
for whom services are performed, that shows the worker is not free to follow
his or her own pattern of work, and indicates employee status.
11. Oral or written reports: A
requirement that the worker submit regular reports indicates employee status.
12. Payment by the hour, week,
or month: Payment by the hour, week, or month generally points to
employment status; payment by the job or a commission indicates independent
contractor status.
13. Payment of business and/or
traveling expenses: If the person for whom the services are
performed pays expenses, this indicates employee status. An employer, to
control expenses, generally retains the right to direct the worker.
14. Furnishing tools and
materials: The provision of significant tools and materials to
the worker indicates employee status.
15. Significant investment: Investment
in facilities used by the worker indicates independent contractor status.
16. Realization of profit or
loss: A worker who can realize a profit or suffer a loss as a
result of the services (in addition to profit or loss ordinarily realized by
employees) is generally an independent
contractor.
17. Working for more than one
firm at a time: If a worker performs more than de minimis services
for multiple firms at the same time, that generally indicates independent
contractor status.
18. Making service available
to the general public: If a worker makes his or her services
available to the public on a regular and consistent basis, that indicates
independent contractor status.
19. Right to discharge: The
right to discharge a worker is a factor indicating that the worker is an
employee.
20. Right to terminate: If
a worker has the right to terminate the relationship with the person for whom
services are performed at any time he or she wishes without incurring
liability, that indicates employee status.
Contact us if you have questions, or would like more information on how we can help.