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Employee or Independent Contractor? 10 Ways to Tell

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It’s important to know someone you’re hiring would be considered an employee or an independent contractor. This determines who will be held responsible for medical bills or lost wages should they get injured on the job. A number of factors are reviewed when evaluating employee status.

10 Common Law Questions to Determine a 1099 vs. W-2 Worker

1. Is the worker directed on how the work should be performed or simply the final product?

An employee will generally be directed on how a project should be completed, while an independent contractor will use his own methodology. 

2. Does the business provide training for the worker?

This indicates employee status. 

3. Are the worker's services a substantial or integral part of the business?

This indicates employee status. 

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4. Does the business require that the worker personally perform all services, or can they hire and pay assistants?

Independent contractors may have the option of hiring other contractors to perform their work.

5. Does the worker have profits and losses independent of the business?

This is an indication that the worker is running a separate business, and is therefore an independent contractor. 

6. Does the worker have an ongoing relationship with this business?

While the worker and the company may simply have a good working relationship, the IRS may view this as an indication of employee status. 

7. Does the worker set their own schedule and hours?

If yes, this suggest they are an independent contractor.

8. Is the worker required to work full-time?

This is an indication of employee status. 

9. Is the worker allowed to work for other clients? Do they provide their own tools and equipment?

This indicates independent contractor. 

10. Can the relationship be terminated at any time?

This suggests employee status. An independent contractor would only be discharged for failure to meet contract specifications; likewise, an independent contractor is under contract and cannot quit until the project is completed. 


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Tags: workers compensation, small business, employers