IRS 3 Part Test

The IRS recently establisedh the following three sets of factors: behavioral control, financial control, and the type of relationship. "Behavioral control" covers facts that show whether the business has a right to direct and control how the work is done, through instructions, training, or other means. These facts include: · When and where to do the work · What tools and equipment to use · What workers to hire to assist · Where and how to purchase supplies and services · What work must be performed by a specific individual · What sequence to follow in performing work Independent contractors usually have their own methods for doing the job, while employees need to be trained in the work. "Financial control" covers facts that show whether the employer or business has a right to control the business aspects of the worker's job. This includes: · The extent to which the worker has unreimbursed business expenses · The extent of the worker's investment in the business, (the independent contractor usually has invested in tools, equipment, or education) · The extent to which the worker makes services available to the general market · How the business pays the worker · The extent to which the worker can realize a profit or incur a loss The "type of relationship" factors include: · Written contracts describing the relationship the parties intended to create · The extent to which the worker is available to perform services for other, similar businesses · Whether the business provides the worker with employee-type benefits, such as insurance, a pension plan, vacation pay, or sick pay · The permanency of the relationship