How to tell the difference?
An IC is the one that performs/contracts the actual work for another, usually supplying laborers, or materials.
The IRS has 3 high level requirements for determination.
1. Reasonable Basis- Must be a reasonable basis for not treating worker as employees.
2. Substantive Basis- Must have treated all workers as IC’S.
3. Reporting Consistency- Must regularly file form 1099-MISC if wages exceed $600/year.
Actions must be consistent.
Degree of control is the main determining factor!
Behavorial control- when and where to do work, what tools/equipment to use, what sequence to follow.
Financial Control- Are their unreimbursed expenses does ic invest in business, how business pays workers. extent worker can realize a profit or loss.
Tyoe of relationship
(Text courtesy of Ed Jones CPA)
