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Subject:Re: IRS Scrutiny From:Peter Kent <71601 -dot- 1266 -at- COMPUSERVE -dot- COM> Date:Fri, 10 Nov 1995 13:10:48 EST
Please post it.
> >>From: Richard Mateosian <srm -at- C2 -dot- ORG>Subject: IRS scrutiny>Richard
> Mateosian goes on to say that "The IRS has stated explicitly>that
> incorporation is irrelevant to this determination." Richard, can>you
> to a particular document?
> No. In fact at the moment I can't even find my list of the 20 factors.<<
> I have the list, if you want it; I have it electronically; I could
> here if people need it.
> Peter Kent<<<
As requested, here's the 20-questions list.
A Yes answer to any of the first fifteen questions takes you one step further
from independent contractor status. (Note, this is my order, not necessarily
the IRS's order; I set this up so that you have two groups, some in which a
Yes answer hurts, then a group in which the Yes answer helps.)
1. Instructions: Are your required to comply with another person's
instructions about how, when, and where you work?
2. Training: Did the client require that you take a training course to learn
how the client wants you to do the job?
3. Integration: Are your services integrated into the client's business
4. Services Rendered Personally: Do you do the work, rather than employ
someone else to do some of the work covered by the contract with the client?
(You may have your own employees, or use subcontractors.)
5. Continuing Relationship: Do you have a continuing relationship with the
client (even if you work irregularly but frequently)?
6. Set Hours of Work: Does the client set your hours?
7. Full-time Required: Does the client expect you to work full-time,
effectively restricting you from working for other clients?
8. Doing Work on Employer's Premises: Do you work at a location specified by
9. Order or Sequence of Work Set by Employer: Does the client have the right
to establish the routines and schedules that you follow in your job?
10. Oral or Written Reports: Does the client require you to submit regular
oral or written reports?
11. Payment by Hour, Week, or Month: Does the client pay you for the time
worked, rather than paying a set fee for the job?
12. Payment of Business and Traveling Expenses: Does your client pay your
business or travel expenses?
13. Furnishing Tools and Materials: Does the client furnish your tools and
14. Right to Discharge: Does the client have the right to fire you?
15. Right to Terminate: Do you have the right to quit at any time without
A Yes answer to any of the next five questions helps your case, making your
status appear closer to that of a true independent contractor.
16. Hiring, Supervising, and Paying Assistants: Do you hire, supervise, and
pay assistants according to a contract in which you are responsible for
providing materials and labor?
17. Significant Investment: Have you invested in facilities and tools that
are not normally maintained by an employee?
18. Realization of Profit or Loss: Do you have a possibility of economic loss
through an investment in materials, equipment, or salaries?
19. More Than One Client at a Time: Do you work for more than one client at a
20. Making Service Available to General Public: Do you regularly and
consistently make your services available to the general public? Do you
advertise or market your services?
Note that there's absolutely no need to meet all 20 conditions. Answer No to
conditions 1, 6, 8, 11, for instance, and yes to conditions 19 and 20, and
you'll almost certainly be determined to be a freelancer.
Note also, that even if you are incorporated the IRS can use these conditions
to see if you are an employee of your client or not. There's not one word in
this list about corporations, and the IRS has declared that you can't
incorporate in order to get around all this.
Peter Kent: 71601 -dot- 1266 -at- compuserve -dot- com, 303-989-1869
Coming soon, an updated and revised Technical Writer's Freelancing
Guide. E-mail for more information. Comments/suggestions welcome.