US: Contractor vs employee — IRS control factors (primer)

Summary

Labels on contracts do not decide tax status. The IRS groups evidence into behavioral, financial, and relationship-type categories.

1. Behavioral control

Who sets hours, who trains workers, and who evaluates performance? Greater client control often points toward employee treatment.

2. Financial control

Investment in tools, unreimbursed expenses, opportunity for profit or loss, and method of payment all matter.

3. Type of relationship

Written contracts, benefits, permanence of the relationship, and services provided as a key activity of the payer are reviewed.

4. Why it matters

Back payroll taxes, penalties, and state unemployment insurance can stack quickly. Platforms and enterprises increasingly document classification decisions.

5. Sources

• IRS — Independent contractor vs employee