Copyright 2006 National Association of Mystery Shoppers
Chino Hills, CA
“Membership put my Profile in the hands of over 80 Leading Mystery Shopping Firms”
The IRS uses the 20 factors (listed) to determine if a worker is an employee or an independent contractor. However, it is their interpretation and could be challenged. Not all factors apply in each case or carry the same weight.
1. Is the worker required to comply with instructions about when, where and how the work is done?
2. Is the worker provided training that would enable him/her to perform a job in a particular method or manner?
3. Are the services provided by the worker an integral part of the business' operations?
4. Must the services be rendered personally?
5. Does the business hire, supervise, or pay assistants to help the worker on the job?
6. Is there a continuing relationship between the worker and the person for whom the services are performed?
7. Does the recipient of the services set the work schedule?
8. Is the worker required to devote his/her full time to the person he/she performs services for?
9. Is the work performed at the place of business of the company or at specific places set by the company?
10. Does the recipient of the services direct the sequence in which the work must be done?
11. Are regular oral or written reports required to be submitted by the worker?
12. Is the method of payment hourly, weekly, monthly (as opposed to commission or by the job?)
13. Are business and/or traveling expenses reimbursed?
14. Does the company furnish tools and materials used by the worker?
15. Has the worker failed to invest in equipment or facilities used to provide the services?
16. Does the arrangement put the person in a position or realizing either a profit or loss on the work?
17. Does the worker perform services exclusively for the company rather than working for a number of companies at the same time?
18. Does the worker in fact make his/her services regularly available to the general public?
19. Is the worker subject to dismissal for reasons other than non-performance of the contract specifications?
20. Can the worker terminate his/her relationship without incurring a liability for failure to complete the job?
According to the IRS, workers are employees if they must comply with the employer's instructions about their work, receive training or direction from the employer, provide services that integrate into the employer's business, render their services personally (can't subcontract), have a continuing working relationship with the employer, must follow set hours of work, work full-time for the employer, perform the work at the employer's site, regularly report to the employer, are paid regularly (e.g. weekly), are paid for business expenses, use the employer's tools, materials, etc. lack a major investment in facilities used to perform services, cannot make a profit or suffer a loss from their services, work for one employer at a time, do not offer services to the public, can be fired, may quit work at any time and not incur a liability. Thus, to qualify as an independent contractor, the opposite of all of these would be true. But remember, the IRS selects the questions and grades the answers.
Strategies for Business Owners
If there is some question as to whether or not a person is an independent contractor of employee, the following may help convince the IRS the person is truly an independent contractor. The business should have the person sign a written agreement attesting to the fact that he/she is an independent contractor.
1. The person should actually bill the business for the services rendered.
2. The person should be required to have their own worker's compensation coverage.
3. As much independence as possible should be given in areas such as hours worked, where the job is to be performed, etc.
4. The person should provide his/her own tools, supplies training, transportation, etc.
The ultimate safeguard is to complete a Form SS-8 which asks the IRS for a determination if the person is an employee. For more information, see IRS Publication 937.
Independent Contractor Responsibilities
1. Your are responsible for you own taxes. The shopping firm will provide contractor with a 1099 if you make more than $600.00 in shopping fees.
2. Keep an accurate record of all business expenses you incur shopping; mileage, postage, supplies, gas, non reimbursable expenses and spending overages not covered by the shop allowance.
3. As an independent contractor you are not eligible for unemployment, workman compensations and other benefits.