Classifying a Worker as an Employee or Independent Contractor

The IRS uses the 20 Factors of the Common Law Test to determine whether an individual is an employee or an IC. These 20 factors or 20 questions assist in determining if a relationship or evidence of control/right to control (behavioral and financial) exists between the payer and worker.

Under Internal Revenue Service rules, anyone who performs services for you is your employee if you can control what will be done and how it will be done, even if freedom of action is granted to the individual worker.

A worker may always be classified as an employee even if the worker meets the criteria of an independent contractor. However, it is illegal to knowingly classify an employee as an independent contractor in order to avoid Affirmative Action recruitment efforts, and or payment of employment taxes, fringe benefits, etc. The IRS imposes fines and penalties for misclassification of service.

The IRS considers a worker to be an independent contractor if he or she:

  • Determines place and sequence of work.
  • Is not trained (by the University) for the job.
  • Possesses special skills or training.
  • Provides a service not related to payer's normal business activities.
  • Has the option to delegate work to others (not University employees).
  • Employs own assistants.
  • Works by the job.
  • Sets own work hours.
  • Generally works off-site.
  • Can set own schedule (work flow).
  • Files reports when job ends; interim reports possible (does not submit regular reports).
  • Pays own business and travel expenses; part of job costs.
  • Furnishes own tools and equipment.
  • Has significant investment in facilities used.
  • Can make a profit or suffer a loss if the project is not completed.
  • Works for several companies at one time.
  • Makes services available to the general public.
  • Can not be fired if results satisfy the contract.
  • Must complete job according to contract specifications.