Independent Contractor Guidelines

Federal and state tax laws require Emory University to ensure that individuals who provide services are properly classified as an employee or independent contractor. Proper classification of an individual will determine Emory's tax withholding and reporting obligations.

An Independent Contractor is an individual who performs services for the business whereby the business has the right to specify the result to be accomplished by the work, but not the means and methods by which the result is to be accomplished. The earnings of a person who is working as an independent contractor are subject to Self-Employment Tax. Businesses generally do not have to pay any taxes on payments to independent contractors.

In contrast, an employee is anyone who performs services for the business and the business controls what will be done and how it will be done. The business must withhold income taxes, withhold and pay Social Security and Medicare taxes, and pay unemployment taxes on wages paid to the employee.

Factors Determining if an Individual is an Independent Contractor

Degree and Control

In determining whether the person providing service is an employee or an independent contractor, all information that provides evidence of the degree of control and independence must be considered.

Factors that provide evidence of the degree of control and independence fall into three categories:

1. Behavioral

Does the company control or have their right to control what the worker does and how the worker does his job? 

2. Financial

Are the business aspects of the worker's job controlled by the payer? (These include things like how the worker is paid, whether expenses are reimbursed, and who provides the tool/supplies, etc.)

 3. Type of Relationship

Are there written contracts or employee type benefits (i.e., pension plan, insurance, vacation pay, etc.)?

Will the relationship continue and is the work performed a key aspect of the business?

All these factors must be weighed by the business when determining whether the person is an employee or an independent contractor. It is not always easy to make the determination and there is no one factor that ultimately stands alone in making the determination.

Per the IRS, the key is to look at the entire relationship, consider the degree or extent of the right to direct and control, and finally, to document each of the factors use in coming up with determination.

IRS Can Make the Determination for You

If, after reviewing the Behavioral, Financial and Type of Relationship factors, and it is still unclear if the person should be classified as an employee or an independent contractor, you can complete Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding. Send the form to the IRS and they will make the determination for you. However, note that it can take up to six months to make that determination.