From the SierraSun, Jeff Quinn shares the details of one court case which concluded that the worker was properly classified as an independent contractor. While this outcome may not have been the one Jeff wanted, it shows that when a worker has a large degree of control on how to accomplish the work, he can be properly classified as an independent contractor. Jeff writes:
So here comes taxpayer Jorge Quintanilla who, the Court notes, is an exceptionally skilled production worker on approximately 150 commercials shot in Southern California.
Jorge believed he qualified as a contractor and reported his expenses on Schedule C as noted above. The Court further notes that the legal distinction between an independent contractor and a common-law employee is settled as a general matter, though it’s often murky in application.
Courts of various stripes, however, have set forth certain factors over the years, intended to guide one to the proper conclusion as to employee versus contractor, including:
The degree of control exercised by the principal over the worker.
The worker’s investment in his workplace.
The worker’s opportunity to make a profit or suffer a loss.
Whether the principal can fire him.
Whether the workplace is part of the principal’s regular business.
The permanency of the worker’s relationship with the principal.
The relationship the parties believed they were creating.
Whether the principal provides employee benefits.
In short, the essential question boils down to “who tells whom to do what?”
After examining all of the facts, the Court concluded that Quintanilla was an independent contractor, in the tax year in question, noting that, “The most important (fact) is that Quintanilla had a large degree of control as to how to accomplish the tasks he had to do throughout the year.”
He had a large degree of independence in determining how to accomplish his work, provided all of his own tools (in which he had invested heavily) and, depending on the outcome of his work, could have earned a profit or suffered a loss.
Read the full story at Revenooer Rants: Tax court reiterates employee/independent contractor distinction