Although this test for worker classification is used by the IRS, this is not the legal test for determining employee status. The legal test is whether there is a right to direct and control the means and detail of work.

1. Do you instruct the person as to when, where and how work is performed?

2. Did you train the person to perform services in a particular way?

3. Are the person's services vital to company operations?

4. Is the person required to perform the work personally?

5. Is the person prohibited from hiring, supervising and paying assistants?

6. Does the person perform regular and continuous services for you?

7. Do you set the hours of work for the person?

8. Does the person provide services on a substantially full-time basis to your company?

9. Is the work performed on your premises?

10. Do you control the sequence or the order of the work performed?

11. Do you require the person to submit regular oral or written reports?

12. Do you pay the person by the hour, week or month?

13. Do you pay the person's travel and business expenses?

14. Do you furnish tools or equipment for the person?

15. Does the person lack a "significant investment" in facilities, tools or equipment?

16. Can the person realize a profit or loss from his/her service to your company?

17. Is your company the sole or major source of income for the person?

18. Does the person not make services available to the general public?

19. Do you have the right to discharge the person at will?

20. Can the person terminate the relationship without liability?

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