IRS Guidelines for Determining Worker Status

Businesses often hire outside consultants, advisors and other types of workers, sometimes through an agency. When it comes to classifying these workers for tax purposes and to comply with other employment regulations, the type of relationship can get a little murky. If you are in his situation, and are not entirely certain how to ensure that the temporary workers assigned to your company are classified as independent contractors, the IRS has published information online to help you out.

The information page on the IRS website offers tips on how to properly determine whether workers are contract or employees.

One section explains the law as it regards contract labor. It lays out the circumstances where a person would be considered an employee and the circumstances where he or she would be considered an independent contractor.

The IRS also has an online manual that looks at the facts that create an independent contractor-employer relationship and the facts that show a relationship between an employee and employer. The manual, however, is only meant to be a guide and the information is not intended to carry any legal weight.

In determining how a person should be classified, the IRS looks at the degree of control that the company exercises over the employee in three key areas. The manual covers a range of topics in each of the three categories to determine the status of an employee.

The first is behavioral, whether or not the company controls or has the authority to control what the person does and how he or she does it. The second category is financial, whether the business aspects of a person’s job are supervised by the company and how the worker is paid. The third category deals with the kind of relationship between the worker and the company, whether there are contracts in writing and whether there are benefits, such things as pension plans, insurance and vacation pay.

If you have looked at all the information and categories, and you still are not sure how the worker would be classified, you can file a Form SS-8 with the IRS. Once the form is filed, the IRS will review your case and make a ruling on the status of the worker.

Working with a staffing agency such as the Opti Staffing Group can go a long way to helping you avoid the sticky wicket that IRS guidelines can be. If you’d like more information about our services, don’t hesitate to contact us! We look forward to serving you.

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