Independent Contractor vs. Employee Flowchart

Tax Class: Independent Contractors vs. Employees - Learn the rules involving the classification of workers as either independent contractors or employees.  Both federal and California law are discussed.

Note: This exercise is for educational purposes only and is not intended to be legal or tax advice. Your particular facts and circumstances should always be considered when applying the U.S. tax law. You should consult a competent professional with respect to your particular situation.

Introduction: There are two principal lines of inquiry regarding the issue of independent contractor vs. employee: (1) Does the federal exception to reclassifying a worker as an employee apply (this exception is known as "Section 530"); and (2) if not, is the worker an independent contractor under the traditional common law concepts?

For an explanation of Section 530, please read the article, Nannygate Revisited, Do You Really Owe Taxes on Your Baby-Sitter? since many of the concepts and terms used in this interactive application are contained there.

If you do not qualify for relief under Section 530, then you must apply the traditional common-law tests, also called the IRS 20-factor test.

Good luck! - Click here to Start