Internal Revenue Service 20 Factors

To help determine whether an individual is an employee under the common-law rules, the IRS has identified 20 factors that are used as guidelines to determine whether sufficient control is present to establish an employer-employee relationship. In addition, UNLV has implemented a questionnaire form that will assist the department and Accounts Payable to determine this relationship.

These factors should be considered guidelines. Not every factor is applicable in every situation, and the degree of importance of each factor varies depending on the type of work and individual circumstances. However, all relevant factors are considered in making a determination. No one factor is decisive.

It does not matter that a written agreement may take a position with regard to any factors or state that certain factors do not apply if the facts indicate otherwise.

The 20 factors indicating whether an individual is an employee or an independent contractor follow.

1. Instructions. An employee must comply with instructions about when, where, and how to work. Even if no instructions are given, the control factor is present if the employer has the right to control how the work results are achieved. Independent contractors are given an assignment and left to accomplish it.

2. Training. An employee may be trained to perform services in a particular manner. Independent contractors ordinarily use their own methods and receive no training from the purchasers of their services. Independent contractors come to the job fully trained and ready to go.

3. Integration. An employee's services are usually integrated into the institution operations because the services are important to the success or continuation of the institution. This shows that the employee is subject to direction and control. Independent contractors provide peripheral services independent of the business operation.

4. Services rendered personally. An employee renders services personally. This shows that the employer is interested in the methods as well as the results. Independent contractors may send substitutes.

5. Hiring assistants. An employee works for an employer who hires, supervises, and pays workers. An independent contractor can hire, supervise, and pay assistants under a contract that requires him or her to provide materials and labor and to be responsible only for the results.

6. Continuing relationship. An employee generally has a continuing relationship with an employer, usually every business day. A continuing relationship may exist even if work is performed at recurring although irregular intervals. An independent contractor will usually work at sporadic intervals under specific job completion dates.

7. Set hours of work. An employee usually has set hours of work established by an employer. An independent contractor generally controls his/her own work time.

8. Full-time required. An employee may be required to work or be available full-time. An independent contractor can work when and for whom he or she chooses; usually on a part time basis.

9. Work done on premises. An employee usually works on the premises of an employer, or works on a route or at a location designated by the employer. An independent contractor may work anywhere, depending on what has to be done.

10. Order or sequence set. An employee may be required to perform services in the order or sequence set by an employer. This shows that the employee is subject to direction and control. An independent contractor controls the order in which they do work.

11. Reports. An employee may be required to submit reports to an employer. This shows that the employer maintains a degree of control. Independent contractors report on work progress as goals are met and when the job is finished.

12. Payments. An employee is generally paid by the hour, week, or month. An independent contractor is usually paid by the job.

13. Expenses. An employee's business and travel expenses are generally paid by an employer. This shows that the employee is subject to regulation and control. Independent contractors pay their own expenses.

14. Tools and materials. An employee is normally furnished significant tools, materials, and other equipment by an employer. Independent contractors provide their own tools.

15. Investment. An independent contractor has a significant investment in the facilities he or she uses in performing services for someone else.

16. Profit or loss. Employees receive wages or salary whether or not the business makes a profit or loss. An independent contractor can make a profit or suffer a loss depending on income and expenses.

17. Works for more than one person or firm. An independent contractor provides his or her services to several persons or firms at the same time.

18. Offers services to general public. Employees usually work for their employer rather than the general public. An independent contractor makes his or her services available to the general public.

19. Right to fire. An employee can be fired by an employer. An independent contractor cannot be fired so long as he or she produces a result that meets the specifications of the contract.

20. Right to quit. An employee can quit his or her job at any time without incurring liability. An independent contractor usually agrees to complete a specific job and is responsible for its satisfactory completion, or face legal liability for failure to complete it

Forms

Notes:

You can reach Yvette Walton
by Phone:
(702) 895-1143

You can reach the NRA Tax Specialist Debbie Honrath at (702) 895-1243

Or Fax:
(702) 895-1519