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The IRS Categories of Evidence
It's important to note that while the 20 Questions continues to
be referred to in most media discussions on the independent contractor
issue, the IRS has focused their attention in recent years on three
critical categories of evidence that encompass many of the 20 Questions.
These categories of evidence were first introduced by the IRS as
part of their 1996 Employees vs. Independent Contractor Training
Manual.
The Categories of Evidence:
A. BEHAVIORAL CONTROLS
Factors that illustrate whether
the firm has a right to direct or control how the worker performs
the work:
1. Instructions
2. Training
B. FINANCIAL CONTROLS
Factors that determine whether the
worker has a right to direct or control how the business aspects
for his/her business activities are conducted:
1. Opportunity for profit or loss
2. Significant investment
3. Unreimbursed expenses
4. Method of payment
5. Services available to the relevant market
C. RELATIONSHIP OF THE PARTIES
Factors that illustrate what the
actual relationship of the parties appears to be:
1. Intent of parties
2. Employee benefits
3. Permanency of the relationship
4. Services are part of regular business activities
5. Discharge and termination of services
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