The IRS has established 20 guidelines to help employers determine whether a worker
should be treated as an employee or an independent contractor for tax purposes. Those
20 guidelines are as follows:
Instructions: Employees comply with their employer's instructions about when, where, and how to
work, or the employer has the right to control how a worker's work results are achieved.
Independent contractors have more flexibility.
Training: Employees may receive training from their employers to perform services in a particular
manner. Independent contractors usually use their own work methods and receive no
training from those purchasing their services.
Integration: Employees' services are usually integrated into the business's operations because
they are key to the success or the continuation of the business. Independent contractors
are independent of the business's operation.
Services Rendered Personally: Employees render services personally. Independent contractors render services as
Hiring Assistants: Employees work for an employer. Independent contractors can hire, supervise, and
pay assistants under a contract that requires them to provide materials and labor
and to be responsible for the results.
Continuing Relationship: Employees generally have ongoing relationships with their employers. Independent
contractors' relationships will usually be more sporadic.
Set Hours of Work: Employers usually set their employees' work hours. Independent contractors usually
set their own hours.
Full-Time Required: Employees may be required to work or to be available full time. Independent contractors
may work when and for whom they choose.
Work Done on Premises: Employees usually work on their employers' premises or on a route or at a location
approved by their employers.
Order or Sequence Set: Employees may be required to perform services in the order or sequence set by their
employers. Independent contractors can establish their own sequence.
Reports: Employees may be required to submit reports to their employers. Independent contractors
are not required to submit reports to their clients.
Payments: Employees are paid by the hour, week, or month. Independent contractors are usually
paid by the job or through a commission.
Expenses: The business and travel expenses of employees are generally paid for by their employers.
Independent contractors are responsible for paying their own expenses.
Tools and Materials: Employers normally furnish their employees with the key tools, materials, and other
materials they need to do their jobs. Independent contractors normally furnish their
own tools and materials.
Investment: Employees normally do not invest in the facilities. Independent contractors have
a significant investment in the facilities they use to perform services for someone
Profit and Loss: Employees do not experience a profit or loss; independent contractors can.
Works for More Than One Person or Firm: Employees usually work for one firm at a time. Independent contractors may work for
multiple persons or firms at the same time.
Offer Services to the General Public: Employees usually work for one employer. Independent contractors make their services
available to whomever they want.
Right to Fire: Employees can be fired by their employers. Independent contractors cannot be fired
as long as they produce a result that meets the specifications of their contract.
Right to Quit: Employees have the right to quit a job at any time without incurring liability. Independent
contractors usually agree to carry out specific tasks or series of tasks and are responsible
for completing those tasks satisfactorily, or are legally obligated to make good for
failing to do so.
If you have questions about these guidelines, call the IRS office closest to you.