En esta noticia
Working remotely does not automatically make a person an independent contractor for federal tax purposes. The Internal Revenue Service (IRS) says a remote worker can still be classified as an employee depending on the nature of the relationship with the company.
The classification matters because employees and independent contractors are subject to different federal tax rules. The IRS looks at several factors to determine whether a worker is an employee or self-employed.
How the IRS classifies remote workers
The IRS says that a remote worker is generally an employee if the company has the right to control what the worker does and how the worker performs the job. This can apply even when the worker has the freedom to work remotely.
The IRS does not determine worker status based on a single factor. Instead, it considers the entire relationship between the worker and the business.
The three factors the IRS considers
The IRS groups the factors it uses into three categories: behavioral control, financial control, and the type of relationship between the parties.
- Behavioral control: This considers whether the business has the right to direct and control how the worker performs the job, including instructions, training, and other aspects of the work.
- Financial control: This looks at the business aspects of the worker’s job, such as how the worker is paid, whether expenses are reimbursed, and whether the worker has an opportunity for profit or loss.
- Type of relationship: The IRS considers factors such as written contracts, employee benefits, the permanency of the relationship, and whether the services performed are a key aspect of the business.
Why worker classification matters for taxes
The classification determines how federal employment taxes are handled. Businesses generally withhold income taxes and Social Security and Medicare taxes from employees’ wages and pay the employer share of certain employment taxes.
Independent contractors, by contrast, are generally responsible for their own income and self-employment taxes. Businesses typically report payments to independent contractors using Form 1099-NEC when the reporting requirements apply.
The IRS recommends that workers and businesses carefully determine the correct classification rather than relying only on the terms used in a contract. If a worker is unsure about their status, the IRS provides Form SS-8 to request a determination of worker status.