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Employees vs Contractors EBook US

Free Payroll eBooks for Small Business Owners and Startup Founders in the United States & Canada

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Page 15 of 19

Type of Relationship Are there written contracts or employee type benefits (i.e. pension plan, insurance, va- cation pay, etc.)? Will the relationship continue and is the work performed a key aspect of the business? Businesses must weigh all these factors when determining whether a worker is an em- ployee or independent contractor. Some factors may indicate that the worker is an employee, while other factors indicate that the worker is an independent contractor. There is no "magic" or set number of fac- tors that "makes" the worker an employee or an independent contractor, and no one factor stands alone in making this determination. Also, factors which are relevant in one situation may not be relevant in another. The keys are to look at the entire relationship, consider the degree or extent of the right to direct and control, and finally, to document each of the factors used in coming up with the determination. If there is any confusion or concerns, you can ask for an IRS ruling, which can take up to 6 months. The IRS uses their 20-Test Factor guidelines, based on court rulings and previous investigations. IRS agents have been instructed in recent years to focus on the overall relationship between the company and individual working with or for them. Transitioning from Contractors to Employees | Pg. 16

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