Mistakenly classifying an employee as an independent contractor can result in significant fines and penalties. In the past, the IRS used a list of 20 factors to help agents, employers and the courts determine worker status for tax purposes. Each of the factors falls into three main categories: Behavioral, Financial and the Type of Relationship. The importance of each factor ultimately depends on the individual circumstances. These rules are intended only as a guide, but they should be helpful in determining whether you wield enough control to show an employer-employee relationship.
You can read more about this issue - and other relevant business and tax issues - in the 1st Quarter issue of our quarterly business newsletter, Our Perspectives.