Is Your Worker an Independent Contractor or an Employee?

Independent contractor status is determined by several factors, which differ among the various government agencies and courts that enforce regulations. The rules can be complex, and they often overlap. In all cases, however, it’s not a single factor but the totality of the circumstances that determines whether a worker is an independent contractor or employee.

Answer the following questions to determine your compliance with the classification rules
for independent contractors:

1. Is the work being done outside the scope of your core business?
   
   Yes No
2. Did the worker provide a business Employer Identification Number (EIN) and not a Social Security number?
   
   Yes No
3. Does the worker function independently, rather than getting day-to-day training and supervision?
   
   Yes No
4. Does the individual work on well-defined projects with clear deliverables?
   
   Yes No
5. Does the worker set his or her own work hours?
   
   Yes No
6. Does the worker use his or her own equipment, work space and supplies?
   
   Yes No
7. Does the worker have other customers or clients?
   
   Yes No
8. Is the worker paid by the project, and not by the week or month?
   
   Yes No
9. Does the worker submit invoices that are treated as accounts payable (not payroll)?
   
   Yes No
10. Does the worker pay his or her own business expenses?
    
    Yes No
11. Do you have a written contract that states the worker is an independent contractor?
    
    Yes No
12. Do you/will you issue a 1099 to the worker at the end of the tax year?
    
    Yes No

For a worker to be an independent contractor under the law, you want to answer yes to most, if not all, of these questions. Questions pertaining to the worker’s schedule, setup, general expenses and other day-to-day working conditions will hold the most weight in your classification decisions.

Note: Beginning with calendar year 2020, the IRS will be using form 1099-NEC for reporting independent contractor earnings. For additional information on the 1099-NEC form, please see the IRS site.