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Common Law Test

Applying the Common Law test to determine whether a worker is an employee or an independent contractor basically consists of analyzing the level of control the employer exerts over the worker. The more control possessed by the employer (especially over the means of accomplishing a task rather than the end result), the more likely a worker is an employee. Control, in this instance, is defined as the level of legal right to direct rather than the level of direction actually provided.

The IRS uses a twenty-question test to assess the level of control. (Most states, on the other hand, use a more stringent, three-part test [ABC Test], to determine whether a worker is an employee.) Yes answers provide evidence of an employer - employee relationship.

(1) Is the worker required to follow the employer's instructions in completing the job or accomplishing the task?

(2) Does the employer provide the training necessary for completion of the job?

(3) Are the worker's specific personal services required for successful completion of the job?

(4) Are the worker's services crucial to the success or continued existence of the company?

(5) Does the employer set work hours?

(6) Does the worker have a continuing relationship with the company?

(7) Does the employer hire, supervise, or pay any of the worker's assistants?

(8) Is the worker precluded from seeking assignments with other companies or from refusing assignments offered by the employer?

(9) Does the employer specify the location where the work must be performed?

(10) Does the employer direct the order or sequence of tasks to be performed?

(11) Does the employer require regular progress reports?

(12) Is the worker paid by the hour, week, or month, rather than for the completion (or stage of completion) of the project?

(13) Does the worker work only for the employer?

(14) Does the employer pay business overhead and incidental expenses?

(15) Does the employer provide equipment, tools, and materials?

(16) Is the work performed on the employer's premises or using the employer's facilities?

(17) Are the worker's services not available to the general public?

(18) Does the employer provide a minimum "salary" and therefore shield the worker from the risk of profit or loss on the job.

(19) Does the employer have the right to terminate the worker even if the job results are achieved?

(20) Is the employer required to pay the worker for time spent even if the job is not completed?

Answers to the above questions will help determine whether a worker is an independent contractor or an employee. Job title, designation as a "contractor" within the terms of the "contract," or the actual degree of freedom enjoyed by the worker have no bearing on the level of legal control and therefore no weight in the determination of status.


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Helpful Hint... Anytime you move or have a major life change (for example - marriage, divorce, birth of a child, etc.) always be sure to complete a new W-4!