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December 17, 2010
4 Categories of IRS Worker Classification

Scott E. Landau, Esq., partner with Pillsbury Winthrop Shaw Pittman, LLP, New York office, explained that worker classification is based both on facts and on circumstances, and there are four categories of classification:

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  1. Common law employee (most employees come under this classification).
  2. Statutory employee (very limited in scope with examples such as certain drivers who are considered agents and full time insurance sales agents for one company).
  3. Common law independent contractor.
  4. Statutory independent contractor (also very limited in scope with examples such as direct sellers that aren’t permanent in a retail establishment, or licensed realtors with income based on sales.)

The IRS offers an online resource that may help employers and workers determine whether a worker should be categorized an employee or an independent contractor. It is titled, “Employee vs. Independent Contractor—Seven Tips for Business Owners". The complete BLR webinar CD, “Employment Tax Audits: What You Need to Know Now About the IRS’ New In-Depth Scrutiny of Your Independent Contractor,” is available on BLR.com.

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