My last post talked about the first factor used by the IRS in determining whether or not a worker is defined as an employee (and therefore income tax withholdings are due from the employer) or an independent contractor and the worker is responsible for their own income taxes.

The second factor is "Capital."  In essence what this factor is analyzing is who is investing in facilities, tools, etc. for the worker?  If the employer provides all of the tools, financing, and office space to the worker they may likely be an employee.  However, if the worker provides his own tools and facilities where his work is performed, he is likely an idependent contractor. 

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