Employment Status—Employee v. Independent Contractor, written by Helen E. Marmoll, Esq., describes in detail who is an “employee” for federal employment tax purposes and explains the differing tax treatment of employees and independent contractors. Defining the “employee” requires an examination of the applicable common law factors, any special statutory provisions in the area and federal court decisions.
This Portfolio examines the definition of "wages" and of "employer" for federal employment tax purposes. Also, the Portfolio discusses the classification of various occupations.
Other specific topics covered include the IRS's classification settlement program, employment tax litigation considerations, and more. Employment Status—Employee v. Independent Contractor allows you to benefit from:
This Portfolio is part of the U.S. Income Portfolios Library, a comprehensive series that includes more than 200 Portfolios, which cover every federal tax topic with expert, in-depth analysis, and offer commentary on a wide range of federal taxation topics, including Compensation Planning, Deductions and Credits, Partnerships and Corporations, Special Pass-Through Entities, Corporate Reorganizations, Real Estate, Procedure and Administration, and more.
Detailed Analysis
I. Statutory Provisions Involved
Introductory Material
A. The § 530 "Safe Harbor" Statute
1. Reasonable Basis Test
2. Tax Return Test
3. Position Test
4. Exception to § 530
B. Classification Settlement Program & Early Referrals
C. Income Tax Provisions
1. Section 61
2. Section 162
3. Benefit Plans
D. Employment Tax Provisions
1. Federal Insurance Contributions Act
2. Federal Unemployment Tax Act
3. Income Tax Withholding
4. Self-Employment Contributions Act (SECA)
5. Section 3505
6. Section 3509
II. Pertinent Indicators
A. General Tests
B. Indicator Zones and Their Specific Factors
1. Details of Work Performance
a. Instructions:
b. Training
c. Set Hours of Work
d. Full Time Required
e. Order or Sequence Set
f. Oral or Written Reports
g. Skill
h. Labels
2. Expenses of Work Performance
a. Payment of Business and/or Traveling Expenses
b. Furnishing of Tools and Material Names
c. Significant Investment
d. Licenses and Taxes
3. Compensation for Work Performance
a. Payment by Hour, Week, Month
b. Realization of Profit or Loss
c. Insurance
d. Benefits
4. Duration of Work Position
a. Right of Discharge
b. Right to Terminate
c. Continuing Relationship
5. Structure of Work Position
a. Integration
b. Services Rendered Personally
c. Hiring, Supervising, and Paying Assistants
d. Working for More Than One Firm at a Time
e. Making Service Available to General Public
f. Principal in Business
g. Intent
h. Governmental or Regulatory Rules
i. Industry Custom
j. State Law Characterization
k. Incorporation
6. Location of Work Performance.
III. Identifying "Wages"
A. Definition of "Wages"
B. Exceptions
C. Nonresident Aliens
D. Foreign Source Income
E. Benefit Plans
F. Special Situations
G. FICA and FUTA Liability Limits
IV. Identifying "Employment"
A. "Employer" Defined
B. Application
V. Authorities by Occupation
A. Introduction
B. Alphabetical Treatment
1. Accountants
2. Actors
3. Actresses
4. Advertising Sales Agents
5. Anesthetists
6. Apartment Managers
7. Appliance Sales Agents
8. Applicators
9. Appraisers
10. Arbitrators
11. Architects
12. Artisans
13. Artists
14. Associate Physicians
15. Athletes
16. Athletic Officials
17. Attorneys
18. Auctioneers
19. Auditors
20. Automobile Mechanics
21. Automobile Repairers
22. B-Girls
23. Babysitters
24. Bail Agents
25. Bakery Dealers
26. Bakery Distributors
27. Bakery Products Sales Agents
28. Band Leaders
29. Band Members
30. Bar Pilots
31. Barbers
32. Bean Station Operators
33. Beauticians
34. Beef Boners
35. Bellboys
36. Belly Dancers
37. Big Boys
38. Bill Collectors
39. Biologists
40. Blind Persons
41. Board Members
42. Boat Engineers
43. Bonding Agents
44. Bondsmen
45. Bookkeepers
46. Brokers
47. Bulk Oil Distributors
48. Burial Lot Sales Agents
49. Bus Drivers
50. Butlers
51. Cable TV Subscription Sales Agents
52. Car Drivers
53. Car Inventory Services
54. Car Shuttlers
55. Caretakers
56. Carpenters
57. Carpet Sales Agents
58. Case Workers
59. Catalog Sales Merchants
60. Caterers
61. Catering Workers
62. Cattle Buyers
63. Cattle Dealers
64. Central Telephone Services
65. Chauffeurs
66. Chefs
67. Chick Raisers
68. Chick Sexers
69. Child Care Personnel
70. Child Study Research Coordinators
71. Christmas Wreath Makers
72. Circus Performers
73. Clothing Sales Agents
74. Club Membership Sales Agents
75. Coal Hustlers
76. Coal Unloaders
77. Collectors
78. Commodity Buyers
79. Companions
80. Concessionaires
81. Consignees
82. Construction Workers
83. Consultants
84. Corporate Officers
85. Contest Managers
86. Contract Furniture Sales Agents
87. Contractors
88. Cooks
89. Correspondents
90. Cotton Buyers
91. Counsels
92. Country Correspondents
93. Court Reporters
94. CPAs
95. Credit Union Supervisors
96. Custodians
97. Dairy Supervisors
98. Dairy Testers
99. Deboners
100. Deliverymen
101. Demonstrators
102. Dental Hygienists
103. Design Engineers
104. Directors
105. Directory Services
106. Disc Jockeys
107. District Sales Managers
108. Doctors
109. Domestics
110. Door Sales Agents
111. Drainage Construction Workers
112. Drainage Ditch Repairers
113. Dress Contractors
114. Drivers
115. Dry Cleaners' Managers
116. Editors
117. Electrical Appliance Sales Agents
118. Embalmers
119. Embroiderers
120. Engineering Consultants
121. Entertainers
122. Envelope Addressers
123. Escorters
124. Executive Committees
125. Executors
126. Exercise Boys
127. Exercise Riders
128. Factory Outlet Managers
129. Farm Managers
130. Farm Operators
131. Farmers
132. Fashion Designers
133. Fiduciaries
134. Fishermen
135. Fishing Boat Captains
136. Fishing Boat Crews
137. Floor Layers
138. Flour Sales Agents
139. Food Service Equipment Sales Agents
140. Foreign Entertainers
141. Free-lance Jockeys
142. Free-lancers
143. Fruit Packers/Pickers
144. Fur Trappers
145. Furniture Sales Agents
146. Furniture Unloaders
147. Gardeners
148. Gas Station Operators
149. Geologists
150. Go-Go Dancers
151. Golf Pros
152. Governesses
153. Government Contracts
154. Gravediggers
155. Grooms
156. Guardians
157. Gypsy-chasers
158. Hair Dressers
159. Hair Stylists
160. Handicap Secretaries
161. Handicappers
162. Handwork Workers
163. Hatcheries
163a. Hearing Officers
164. Hog Buyers
165. Hog Dealers
166. Home Demonstration Agents
167. Home Improvement Sales Agents
168. Home Improvement Workers
169. Home Study School Sales Agents
170. Homemakers
171. Home Workers
172. Hostesses
173. Hotel Managers/Operators
174. Hotwalkers
175. House Builders
176. House-to-House Canvassers
177. House-to-House Sales Agents
178. Household Furniture Sales Agents
179. Housemen
180. Humpers
181. Income Tax Examiners
182. Inspectors
183. Installers
184. Instructors
185. Insurance Adjusters
186. Insurance Agents
187. Insurance Company Branch Managers
187a. Interpreters
188. Interviewers
189. Inventory Services
190. Janitors
191. Jockeys
192. Land Clearers
193. Landmen
194. Lawyers
195. Lecturers
196. License Plate Distributors
197. Linesmen
198. Livestock Dealers
199. Loan Solicitors
200. Loggers
201. Lumberjacks
202. Machine Tool Accessory Sales Agents
203. Magazine Sales Agents
204. Magazine Solicitors
205. Mailmen
206. Managers
207. Manicurists
208. Manufacturer's Representatives
209. Manufacturer's Representatives' Sub-agents
210. Market Surveyors
211. Masons
212. Meat Slaughterers
213. Mechanics, Home Improvements
213a. Mediators
214. Merchandise Sales Agents
215. Merchants Police
216. Metal Storm Sash Sales Agents
217. Milk Distributors
218. Milk Haulers
219. Milk Sales Agents
220. Miners
220a. Ministers
221. Models
222. Motel Operators/Managers
223. Musicians
224. Narrators
225. Needlework Workers
226. Negotiators
227. Newspaper Boys
228. Newspaper Carriers
229. Newspaper Dealers
230. Newspaper Delivery Personnel
231. Newspaper Plant Operators
232. Newspaper Reporters
233. Newspaper Route District Men
234. Night Watchmen
235. Nurses
236. Oil Distributors
237. Oil Products Distributors
238. Oil Well Pumpers
239. Orchestra Leaders
240. Orchestra Members
241. Organ Tuners
242. Organizers
243. Outside Readers
244. Outside Salesmen
245. Owners/Operators
246. Part-time Teachers
247. Patented Products' Sales Agents
248. Pathologists
249. Patrollers
250. Pattern Makers
251. Peace Officers
252. Periodical Sales Agents
253. Photographers
254. Physicians
255. Piano Tuners
256. Piecemakers
257. Pilots
258. Plant Operators
259. Police
260. Policing Agents
261. Porters
262. Postmasters
263. Poultry Slaughterers
264. Printers
265. Prisoners
266. Process Servers
267. Proctors
268. Professional Athletes
269. Professors
270. Protectors
271. Pursers
272. Quilters
273. Race Track Stewards
274. Radio Sales Agents
275. Radiologists
276. Real Estate Investment Trusts Managers
277. Real Estate Sales Agents
278. Realtors
279. Receivers
280. Redcaps
281. Referees
282. Repairers
283. Research Assistants
284. Research Associates
285. Research Coordinators
286. Researchers
287. Resident Doctors
288. Restaurant Operators
289. Retail Furniture Sales Agents
290. Roofers
291. Roofing Applicators
292. Roofing Sales Agents
293. Sales Agents
a. Ads
b. Burial Lots
c. Catalog Sales
d. Club Memberships
e. Commodities
f. Demonstrators
g. Household Items
h. Loans
i. Manufacturer's Representatives
j. Real Estate and Securities
k. Sales Clerks
l. Stationery
m. Subscriptions
n. Swimming Pools
o. Telephone Solicitations
p. Tires
q. Used Cars
r. Yachts/Ships
294. Sales Agents Helpers
295. Sales Clerks
296. Schochets
297. Seafood Processing Workers
298. Seafarers
299. Seamstresses
300. Securities Sales Agents
301. Security Personnel
302. Servants
303. Sewers
304. Sewing Machines Sales Agents
305. Sextons
306. Sharecroppers
307. Ship Sales Agents
308. Siding Applicators
309. Siding Sales Agents
310. Skidders
311. Slaughtering House Workers
312. Slaughtering Plant Workers
313. Speakers
314. Special Peace Officers
315. Stationery Sales Agents
316. Stenographers
317. Stone Applicators
318. Stonecutters
319. Store Managers
320. Student Researchers
321. Students
322. Subcontractors
323. Subscription Sales Agents
324. Substitute Teachers
325. Supervisors
326. Swampers
327. Swimming Pool Sales Agents
328. Tailors
329. Taxicab Drivers
330. Teachers
331. Teamsters
332. Telephone Directory Distributors
333. Telephone Operators
334. Telephone Solicitors
335. Temporary Sales Clerks
336. Tenant Farmers
337. Tennis Pros
338. Tire Sales Agents
339. Title Examiners
340. Tow Truck Operators
341. Trade Consultants
342. Traffic Controllers
343. Traffic Regulators
344. Trailer Park Managers
345. Trainers
346. Transcribers
347. Truck Drivers
348. Trust Property Managers
349. Trustees
350. Tutors
351. Typists
352. Umpires
352a. Union Officials
353. Unloaders
354. Used Car Salesmen
355. Utility Bill Collectors
356. Vacuum Cleaner Sales Agents
357. Variety Entertainers
358. Vaudeville Acts
359. Waiters
360. Waitresses
361. Watch Repairers
362. Water Well Builders
363. Watermen
364. Weavers
365. Welcome Wagon Personnel
365a. Welders
366. Well Grouters
367. Well Packers
368. Well Sealers
369. Wharf Builders
370. Window Trimmers
371. Window Washers
372. Wrestlers
373. Writers
374. Yacht Sales Agents
VI. Special Situations
1. Agricultural Labor
2. Aliens
3. Criminals
4. Domestics
5. Family Members
6. Foreign Governmental Employees
7. Governmental Employees
8. Partners
9. Religious/Charitable Employees
10. Students/Trainees
VII. Special Considerations
A. "Safe Haven" or "Safe Harbor"
B. Burden of Proof & Choice of Forum
C. Stare Decisis Argument
D. Impossibility Argument
E. Math/Credit Argument
Working Papers
Table of Worksheets
Worksheet 1 Contract Establishing an Independent Contractor Relationship With a Typist While Avoiding the Homeworker Classification
Worksheet 2 Contract Establishing an Independent Contractor Relationship With a Personnel Placement Service Worker
Worksheet 3 Contract Establishing an Employee Relationship With a Temporary Consultant
Worksheet 4 Contract Establishing Independent Contractor Relationship With a Consultant When the Prime Contractor Has Obtained a Contract From the Government
Worksheet 5 Independent Contractor Agreement for Real Estate Agent
Worksheet 6 Independent Contractor Agreement for Direct Sellers
Worksheet 7 Sample Jury Instructions Regarding the Effect of Local Laws or Regulations
Worksheet 8 Sample Jury Instructions Regarding Shifting the Burden of Proof to the Government and the Nature of the Government's Burden
Worksheet 9 Sample Jury Instructions on the "Safe Haven" or "Safe Harbor" Provisions of Section 530 of the Revenue Act of 1978
Worksheet 10 Sample Jury Instructions on Certain of the Common Law Factors Used in Determining Employee vs. Independent Contractor Status
Worksheet 11 Rev. Proc. 85-18, 1985-1 C.B. 518, Safe Haven Rules
Worksheet 12 Classification Settlement Program (CSP) - IRM 4.23.6
Worksheet 13 IRS Worker Classification Training Materials
Worksheet 14 CCA 200009043 (1/4/00) on When to Issue a Notice of Determination Under § 7436 with Respect to a Worker who is a Corporate Officer
Worksheet 15 CCA 200038045 (8/19/00), Follow-up to CCA 2000009043, on Several Areas Related to Corporate Officer Compensation and Classification
Worksheet 16 Worker Classification - Excerpt from IRM 4.25.5
Worksheet 17 Section 530 Relief - Excerpt from Internal Revenue Manual 4.23.5
Worksheet 18 Section 530 Flowchart - IRM Exhibit 4.23.5-5
Bibliography
OFFICIAL
Statutes:
Treasury Regulations:
Treasury Rulings:
Cases:
UNOFFICIAL
Periodicals:
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