July 17, 2009

Independent Contractor or Employee?


A church compensates several individuals who have been considered as Form 1099-MISC independent contractors. However, they are under the direct supervision of the church’s pastor, and he controls the work to be done and the way in which it is done. Should these employees should be reclassified as Form W-2 employees?


The IRS provides excellent guidance to answer this question on its website:

Independent Contractor (Self-Employed) or Employee?

The IRS site says, "In determining whether the person providing service is an employee or an independent contractor, all information that provides evidence of the degree of control and independence must be considered.

"Facts that provide evidence of the degree of control and independence fall into three categories:
Behavioral: Does the company control or have the right to control what the worker does and how the worker does his or her job?
Financial: Are the business aspects of the worker’s job controlled by the payer? (these include things like how worker is paid, whether expenses are reimbursed, who provides tools/supplies, etc.)
Type of Relationship: Are there written contracts or employee type benefits (i.e. pension plan, insurance, vacation pay, etc.)? Will the relationship continue and is the work performed a key aspect of the business?"

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