Employer vs. Subcontractor Test

Do you have employees or Contract Labor?

Just because you call them “1099 workers” or subcontractors, doesn’t make it so! The IRS is clamping down on employers who treat these types of workers as subcontractors, but who are really employees, according to their standards (the only ones that matter in their eyes). Here are the 20 factors that the IRS considers to determine who is an employee, or a 1099 worker.

Who has control over the work being performed?

  1. Instructions
  2. Training
  3. Integration
  4. Services rendered personally
  5. Hiring, supervising, and paying assistants
  6. Continuing relationship
  7. Who sets the hours of work?
  8. Full time required?
  9. Doing work on employer’s premises?
  10. Order or sequence set
  11. Oral or written reports
  12. Payment by hour, week, month
  13. Payment of business/traveling expenses
  14. Furnishing of tools and materials
  15. Significant investment
  16. Realization of profit or loss
  17. Working for more than one firm at a time
  18. Making service available to general public
  19. Right to discharge
  20. Right to terminate

Just because you call them subcontractors doesn’t make it so. If they are considered by the IRS to be employees, there are expensive payroll tax penalties. If there is a doubt, treat them as employees. All subcontractors must complete a form 1099, and the company must file a form 1096 at the end of the year. All subcontractors must fill out a form W-9.

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