In today's agile and gig economy, more people are working as independent contractors. How does the IRS determine whether a person is an employee or independent contractor?
They use a six factor test. The factors, “should not be applied in a mechanical fashion, but with an understanding that the factors are indicators of the broader concept of economic dependence.”
The six factors are:
Is the Work an Integral Part of the Employer's Business?
Does the Worker's Managerial Skill Affect the Worker's Opportunity for Profit or Loss?
How Does the Worker's Relative Investment Compare to the Employer's Investment
Does the Work Performed Require Special Skill and Initiative?
Is the Relationship between the Worker and the Employer Permanent or Indefinite?
What is the Nature and Degree of the Employer's Control?