Can I treat employees working for me as contractors and avoid payroll taxes and employee reporting requirements?
To help determine whether a worker is an employee or an independent contractor for wage withholding purposes, IRS has developed a twenty- factor control test based on common law principles, i.e., principles that have evolved in the courts. The twenty factors indicate what degree of control by the business over the worker is sufficient to establish an employer/employee relationship. The degree of importance of each factor varies depending on the occupation and the factual context in which the services are performed. The twenty factors are designed only as guides for determining whether an individual is an employee. Special scrutiny is required in applying the twenty factors to assure that form is not elevated over substance. This test is not conclusive as to corporate officers and does not apply to statutory independent contractors. (Even if a worker is classified as an employee under this test, an employer may still be entitled to special “Section 530 relief” from withholding responsib
