There are a number of factors which are examined to determine if a worker is properly classified. The IRS has changed the tests over the years and now it focuses on three categories: behavioral, financial and type of relationship.
* Behavioral — Does the company control or have the right to control what the worker does and how the worker does his or her job?
* Financial — Are the business aspects of the worker's job controlled by the payer?
* Type of relationship — Are there written contracts which explain the relationship? Are the terms of the contacts followed?
Businesses must weigh all these factors when determining whether a worker is an employee or independent contractor. Some factors may indicate that the worker is an employee, while other factors indicate that the worker is an independent contractor. There is no one factor which determines whether the worker is an employee or an independent contractor, and no one factor stands alone in making this determination. The various factors are considered to determine if the requisite control over the work is available. Also, factors which are relevant in one situation may not be relevant in another.
The keys are to look at the entire relationship, consider the degree or extent of the right to direct and control, and finally, to document each of the factors used in coming up with the determination.
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If you have been contacted by the IRS or the EDD for a payroll audit, call Robert T. Leonard directly at the Law Offices of Robert T. Leonard at 818-224-7935 or toll free at 888-408-9486, or fill out the online form on this website for a free, confidential, initial case consultation. We will review your case and your options with their respective benefits and drawbacks, and any alternatives to the legal process that you may have. My office accepts Visa, MasterCard, American Express and Discover as payment.