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Type of Relationship
How a business and a worker perceive the relationship can also help define the status as either employee or independent contractor. The factors generally fall into the categories of:
Written Contracts: Although a contract may state that the worker is an employee or an independent contractor, this is not sufficient to determine the worker’s status. The IRS is not required to follow a contract stating that the worker is an independent contractor who is responsible for paying his or her own self employment tax. Actions will speak louder than words.
Employee Benefits: Employee benefits include things like insurance, 401k’s, paid vacation, sick days, and disability insurance. Businesses generally do not offer these benefits to independent contractors. However, the lack of these types of benefits does not necessarily mean the worker is automatically considered an independent contractor.
Permanency of the Relationship: If you hire a worker with the expectation that the relationship will continue indefinitely, rather than for a specific project or period, this suggests the intent was to create an employer-employee relationship.
Services Provided as Key Activity of the Business: If a worker provides services that are a key aspect of the business, it is more likely that the business will have the right to direct and control his or her activities. For example, if a law firm hires an attorney, it is likely that it will present the attorney’s work as its own and would have the right to control or direct that work. This would indicate an employer-employee relationship.