Analyze the Worker Under the Common Law Test

In cases other than statutory ICs and statutory employees , the IRS uses a test called the common law test to determine a worker’s status for federal payroll tax purposes. This test is also called the right of control test because the goal of this test is to determine whether the hiring firm has the right to control the worker on the job. If so, the worker is an employee; if not, the worker is an IC.

The IRS looks at three areas to determine whether a hiring firm has the right to control a worker. These are:

behavioral control on the job
financial control, and
the firm’s relationship with the worker.

The following chart shows the primary factors the IRS looks at for each area.

**Primary IRS Common Law Factors**
BEHAVIORAL CONTROL	A worker will more likely be considered an IC if you:	A worker will more likely be considered an employee if you:
Factors that show whether a hiring firm has the right to control how a worker performs the specific tasks he or she has been hired to do	do not provide training do not give him or her instructions how to work, or do not evaluate how the worker performs	provide instructions that the worker must follow about how to work give the worker detailed training evaluate how the worker does the job
FINANCIAL CONTROL	A worker will more likely be considered an IC if he or she:	A worker will more likely be considered an employee if:
Factors showing whether a hiring firm has a right to control a worker’s financial life	has a significant investment in equipment and facilities pays business or travel expenses himself or herself makes his or her services available to the public is paid by the job, and has opportunity for profit or loss	you provide equipment and facilities free of charge you reimburse the worker’s business or traveling expenses the worker makes no effort to market his or her services to the public you pay the worker by the hour or other unit of time, and the worker has no opportunity for profit or loss—for example, because you pay by the hour and reimburse all expenses
RELATIONSHIP OF THE WORKER AND HIRING FIRM	A worker will more likely be considered an IC if:	A worker will more likely be considered an employee if:
Factors showing whether you and the worker believe he or she is an IC or employee	you don’t provide employee benefits such as health insurance you sign an IC agreement with the worker the worker performs services that are not a part of your regular business activities	you provide employee benefits you have no written IC agreement, and the worker performs services that are part of your core business

We take a closer look at these three areas below. Be warned, however, that in close cases the analysis can be tricky. It is not necessary for all or even a majority of the factors to indicate IC status for a worker to be classified that way. All that is required is that the factors showing lack of control outweigh those showing control. There are no magic number of factors and no one factor alone is enough to make a worker an employee or an IC. It can be difficult to decide which way the scales tip because not all the factors are always equally important, and their importance can vary from case to case. In Section 4, below, we take a close look at how to apply this test.

« Check Statutory Independent Contractor Rules

» Behavioral Control

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