The status of independent contractor vs. employee carries with it many tax ramifications thus utilizing the appropriate classification is key. For example, an employee shares the costs of Social Security and Medical taxes with his or her employer; whereas an independent contractor is responsible for the entire amounts. Independent contractors must pay estimated taxes each quarter, whereas employees generally have taxes withheld from their paychecks by their employer.
Under IRS rules and common-law doctrine, independent contractors control the manner and means by which contracted services, products, or results are achieved. The more control a University exercises over how, when, where, and by whom work is performed, the more likely the workers are employees, not independent contractors.
A worker does not have to meet all 20 criteria to qualify as an employee or independent contractor, and no single factor is decisive in determining a worker's status. The individual circumstances of each case determine the weight IRS assigns different factors.
NOTE: Employers uncertain about how to classify a worker can request an IRS determination by filing Form SS-8, "Determination of Employee Work Status for Purposes of Federal Employment Taxes and Income Tax Withholding." However, some tax specialists caution that IRS usually classifies workers as employees whenever their status is not clear-cut. In addition, employers that request an IRS determination lose certain protections against liability for misclassification.
The 20 factors from Revenue Ruling 87-41 used to evaluate the validity of independent contractor classifications include: