Worker-Business Determining Relationship Behaviors
Table of Contents:
Behavioral Relationship
Behavioral means the amount of control a company has over the worker. If a company has direct control over the way the work is done, the worker is an employee.
If the business has no direct control and lets the worker perform the work in any way, the worker is a contractor.
There are four categories for determining behavior: the nature of instructions, how instructions are given, evaluation of work, and if training is provided.
Behavioral Relationship factors for Common Law Rules
Financial Relationship
Financial control means whether the worker has any monetary investment in assets, paid until completion (unreimbursed costs), opportunity to make or lose money, freedom to work for someone else, and the payment method.
Materialistic investment means having to buy your own tools and equipment. Unreimbursed costs and profit and loss opportunities mean having the opportunity to make more money than agreed, however, you can also lose money. How you’re paid means whether you’ll get a W-2 or a W-9.
Financial Relationship for Common Law Rules
Type of Relationship
The factors the IRS looks at when determining the type of relationship are contracts between the worker and company, benefits (if any), expected length of the relationship, and the type of service(s) provided.
The only factor the IRS overlooks is the contracts, because some contracts may state someone is an independent contractor when that isn’t the case. Some businesses provide benefits and others don’t, not a big determining factor.
The expected stay of a worker and the type of service provided are a big sign of whether the worker is an employee or contractor. If you stay for a long time and perform vital tasks for the business’ daily operation, you should be an employee.
Type of Relationship for Common Law Rules