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What is the Standard Used for Determining Whether or Not an Independent Contractor is an Employee or Not?

Many seem to confuse the criteria used for determining an independent contractor status. For example, what the IRS deems an independent contractor with the guidelines spelled out by the State of Colorado?

What to look for?
There a number of different criteria required for an individual to be categorized as an independent contractor, consider a few:

  1. Does the individual work exclusively for you? A true independent contractor can work for and with many different companies and is not bound to single general contractor.
  2. How is the independent contractor compensated? Independent contractors set rates for work performed according to their standard of what the going or fair rate of compensation is for the work they perform. Any manipulation of the contract rate can mean that a true independent contractor and general contractor relationship does not exist.
  3. Who determines when the independent contractor will perform the work? This criteria is used to help determine who has control. If an independent contractor cannot come and go as they please from a worksite, an employer/employee relationship may exist.
  4. Who determines the standard of quality for the work performed? A true independent professional takes pride in the work performed and is not closely monitored to determine the quality of the work that is to be performed.

The questions noted above are just the basics. There are at least 15 different areas of criteria that are used by the state of Colorado to determine whether or not an independent contractor status exists between a general contractor and an independent or sub contractor hired by a general contractor.

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