To help you determine whether an individual is an employee under the common-law rules, the IRS has identified 20 factors that are used as guidelines
to determine whether sufficient control is present to establish an employer-employee relationship.
These factors should be considered guidelines. Not every factor is applicable in every situation, and the degree of importance of each factor
varies depending on the type of work and individual circumstances. However, all relevant factors are considered in making a determination, and
no one factor is decisive.
It does not matter that a written agreement may take a position with regard to any factors or state that certain factors do not apply, if the facts
indicate otherwise. If an employer treats employee as an independent contractor and the relief provisions discussed earlier do not apply, the
person responsible for the collection and payment of withholding taxes may be held personally liable for an amount equal to the taxes that should have
The 20 factors indicating whether an individual is an employee or an independent contractor are:
- Instructions. An employee must comply with instructions about when, where, and how to work. Even if no instructions are given,
the control factor is present if the employer has the right to control how the work results are achieved.
- Training. An employee may be trained to perform services in a particular manner. Independant contractors ordinarily use their
own methods and receive no training from the purchasers of their services.
- Integration. An employee's services are usually integrated into the business operations because the services are important to the
success or continuation of the business. This shows that the employee is subject to direction and control.
- Services rendered personally. An employee renders services personally. This shows that the employer is interested in the
methods as well as the results.
- Hiring assistants. An employee works for an employer who hires, supervises, and pays workers. An independent contractor can
hire, sunpervise, and pay assistants under a contract that requires him or her to provide materials and labor and to be responsible only for the
- Continuing relationship. An employee generally has a continuing relationship with an employer. A continuing relationship
may exist even if work is performed at recurring although irregular intervals.
- Set hours of work. An employee usually has set hours of work established by an employer. An independent contractor generally can set
his or her own work hours.
- Full-time required. An employee may be required to work or to be available full-time. This indicates control by the employer.
An independent contractor can work when and for whom he or she chooses.
- Work done on premises. An employee usually works on the premises of en employer, or works on a route or at a location
designated by an employer.
- Order or sequence set. An employee may be required to perform services in the order or sequence set by an employer. This
shows that the employee is subject to direction and control.
- Reports. An employee may be required to submit reports to an employer. This shows that the employer maintains a degree of
- Payments. An employee is generally paid by the hour, week, or month. An independent contractor is usually paid by the job or on
a straight commission.
- Expenses. An employee's business and travel expenses are genrally paid by an employer. This shows that the employee is
subject to regulation and control.
- Tools and materials. An employee is normally furnished significant tools, materials, and other equipment by an employer.
- Investment. An independent contractor has a significant investment in the facilities he or she uses in performing services for
- Profit or Loss. An independent contractor can make a profit or suffer a loss.
- Works for more than one person or firm. An independent contractor is generally free to provide his or her services to two
or more unrelated persons or firms at the same time.
- Offers services to general public. An independent contractor makes his or her services available to the general public.
- Right to fire. An employee can be fired by an employer. An independent contractor cannot be fired so long as he or she produces
a result that meets the specifications of the contract.
- Right to quit. An employee can quit his or her job at any time without incurring liability. An independent contractor usual
agrees to complete a specific job and is responsible for its satisfactory completion, or is legally obligated to make good for failure to
IRS help to make determination. If you are unable to determine from the preceding guidelines whether a worker is your employee, you
can file a form SS-8.