Posted by: Hope Placek

With the current state of the economy, everyone (including our government agencies) is looking for every possible source of revenue.  Recent developments indicate that the IRS is increasing the examination of business records in an attempt to uncover individuals who should be employees, but are being paid as independent contractors (or vice versa).  These examinations can result in significant fines to the employer.   The regulations shown below can assist you in determining whether an individual should be classified as an independent contractor or as an employee.  Proper classification is needed to protect your business from significant penalties.  For further discussion of this subject, please contact a Zinner professional.

Employee vs. Independent Contractors

Pursuant to Reg. 31.3121(d)-1(c)(2), the right to control the manner and means of performance is the fundamental common law indicator of an employer-employee relationship.  The actual exercise of control over the manner of performance is not necessarily what is at issue, but the retention by the employer of the right to control the manner in which services are performed is significant.  The law does not require that the employer stand over an employee’s shoulder at every juncture, but simply that it have the right to direct the employee’s performance of the task.

Pursuant to Reg. 31.3121(d)-1(c)(2), if a worker is subject to the direction or control of another merely as to the result to be accomplished by the work and not as to the means and methods by which the result is accomplished, the worker is an independent contractor.