We have several research articles that address the employee vs. contractor status as seen through the eyes of the IRS. The report on our site titled 1099-MISC Filing Basics has the general guidelines from the IRS. Unfortunately, there is not a hard and fast rule regarding how to handle the employee/contractor definition, and not another source. The IRS will typically judge on a case-by-case basis using its guidelines as a way to gauge the situation. The IRS used to refer to a 20-point list but has done away with that in favor of evaluating a situation in terms of a company's behavioral control, financial control and the type of relationship of the parties (see the report referenced above). We encourage you to post the question in the Forums/Message section of the Web site to get feedback from your peers as to how they have handled contractors. They may have some actual experience with the IRS performing a contractor audit and the results.
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