|To assist your understanding of this vital topic, we are providing the following information (adapted with permission) from IRS Publication 937, Business Reporting:
Under common-law rules, anyone who performs services subject to the will and control of an employer, as to both what must be done and how it must be done, is an employee. It doesn't matter that the employer allows the employee discretion and freedom of action, so long as the employer has the legal right to control both the method and result of the services.
Two usual characteristics of an employer-employee relationship are that the employer has the right to discharge the employee and the employer supplies the employee with tools and a place to work. (Now don't assume that you can get around this by having your "employee" provide his own specific supplies. "Tools" is a broad term that can include the equipment required in running a practice such as telephones and copiers).
If you have an employer-employee relationship, it makes no difference how it's described. It doesn't matter if the employee is called an employee, associate, partner or independent contractor. It also doesn't matter how the payments are measured, made or what they are called. Nor does it matter whether the individual is employed full-time or part-time.
The IRS has developed the following list of 20 factors that they use to determine the status of employee or independent contractor. The degree of importance of each factor varies according to the profession and the conditions in which the services are performed. The most important factor is control. If the business owner has the right to control how and when a person works, then that person is most likely to be considered an employee.
An individual is likely to be considered an employee if she:
- Is required to comply with company instructions about when, where and how to work.
- Has been trained by the company to perform services in a particular manner.
- Has her services integrated into the company's operations because the services are critical to the success of the business.
- Must render services personally.
- Utilizes assistants provided by the company.
- Has an ongoing, continuing relationship with the company.
- Has set work hours established by the employer.
- Is required to work the equivalent of full time.
- Works on the company's designated premises.
- Must perform services in the order or sequence determined by the employer.
- Must submit regular progress reports.
- Is paid in regular intervals such as by the hour, week or month.
- Is reimbursed for all business and travel expenses.
- Uses tools and materials furnished by the employer.
- Has no significant investment in the facilities that are used.
- Has no risk of loss.
- Works for only one person or company.
- Does not offer services to the general public.
- Can be discharged by the company.
- Can terminate the relationship without incurring liability.
You can still qualify an individual as an independent contractor even if some of these factors are present in your working relationship. The key elements to differentiating between employee status and independent contractor status in the health care industry involve the following: who regulates the type of work done and how it's performed; where and when the sessions occur; who determines the fee structure; who receives the money from the clients; who provides the equipment and supplies; who pays for client-related expenses; and who generates the clientele.