Independent Contractor vs. Employee – Factor 1: Control
As you know, I have begun a series of articles about the relationship of a worker to the employer to help business owners determine if they have “employees” or “independent contractors.” The reason this is so important is that if you consider a worker an independent contractor and the IRS deems him to be an employee, your business will be liable for the back employment taxes, not to mention the penalties and interest that will have accrued. You will also most likely face personal liability under the trust fund recovery penalty if your business cannot pay the tax liability.
This post is specifically to discuss the first factor considered by the IRS which is Control.
The essence of this factor is this: how much control can the employer exert over the performance of the worker? Of course, when you hire someone to do some work for you, you always exercise some sort of control because you give the specifications to which you want the work completed. The degree of control is the determining factor in this case. Are you so in charge of your workers that you tell them when to show up, where to park, what work to do, how to do the work, when they can take a break, etc.? If you are exercising this much control over a person then based on the “Control Factor” they are more like an employee. Keep in mind, however, that is not the only factor to be weighed.
Next time, we’ll discuss the “Capital Factor.”
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