In a recent Tax Court Memo the Tax Court held that workers hired by a construction company to work on a project-by-project basis were still considered employees and not independent contractors for tax purposes. As a result of this case the construction company was liable for employment taxes for the year in dispute.
In this particular case a construction firm worked on 20 to 30 projects for the year. The sole proprietor of the company hired workers supervised them and set deadlines for each job. Each worker was paid a flat negotiated fee per project. The workers set their own hours and work schedules provided their own transportation and used their own tools.
The Tax Court determined that the construction company’s control over the workers was considered a crucial test in determining the status as employees. The construction company set deadlines and monitored the work which was enough to overcome the argument of possible independent contractor status according to the Court.
The Courts have found that an individual can be considered a common law employee by applying the following factors:
- the degree of control exercised by the principal
- which party invests in work facilities used by the individual
- the opportunity of the individual to to realize a profit or loss
- whether the principal can discharge the individual
- whether the work is part of the principal’s regular business
- the permanency of the relationship
- the relationship the parties believed they were creating