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Are You an Employee or Not?

How can you tell if someone is an employee or independent contractor? It generally boils down to a matter of control. If the employer controls the worker’s activities, he or she should be treated as an employee.

Frequently, a taxpayer will prefer to be labeled as an independent contractor for tax reasons. But that is not always so. For example, in a new case a taxpayer claimed he should be treated as an employee.

Facts: A tile installer was hired to work on a condominium renovation. The company he worked for had a fair amount of control over his work activities. But the installer used his own tools, bought materials for the job and incurred economic risk from his activities. Based on all the factors, the Tax Court concluded that the installer was an independent contractor.

One advantage of being an employee is becoming eligible for benefits. For instance, this status may be valuable to someone without adequate health insurance coverage.

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