The IRS approach to assessing whether your worker(s) is an employee or IC breaks the 20-factor test into 3 areas: 1. Behavioral control. Includes factors such as instruction and training, setting hours, requiring reports. 2. Financial control. Includes manner of payment and who pays for any assistants or equipment, and other business expenses. 3. Relationship of the parties. Includes the right to hire and fire, number of clients the “IC” has, and the IC’s availability. Now the IRS has made this approach official, issuingTraining Materials for IRS Examiners on Worker Classification. (www.irs.gov, type “Training Materials,” then click on the top link). Best defense in an audit:Documentation. •Use a written contract that lists the factors that make the worker an IC. •Have a file or other documentation showing that the relationship is conducted according to the contract and is not a disguised employer-employee relationship. •Prepare for audits. Gather documents and any other evidence the IRS will review to verify the relationship and review them from the IRS’s perspective to ensure they support the treatment of the worker. ...read more