The U.S. Tax Court decided a case yesterday called Jones v. Commissioner. That case provides helpful guidance as to how a determination is made regarding whether a worker is an employee or an independent contractor.
This type of determination is essentially a factual question. The factors that are used in making this determination are: (1) the degree of control over the details of the work by the principal; (2) which party invested in the facilities the worker used; (3) the worker’s opportunity for profit or loss; (4) whether the principal could have discharged the worker; (5) whether the work was part of the principal’s regular business; (6) the permanency of the relationship; and (7) the relationship the parties believed they were creating.
The most important factor is the degree of control over the details of the worker’s work. In this context, an employer-employee relationship is indicated if the principal has the right to control not only the result but also the means and methods used to accomplish the result.
The determination of whether a particular worker is properly designated as an employee or an independent contractor is of vital importance. If you have questions or concerns about this issue, please give DPS a call to discuss your situation.