Independent Contractors

If an IEEE unit wishes to hire an independent contractor, the unit must determine if the worker is truly independent.  At minimum, you cannot exercise dominion and control over the work of the contractor.  You can specify “what” is to be done but not “how”.

The test for determining a worker’s independent status is detailed below.

• After determining that a worker is truly independent, complete an IEEE Independent Contractor Agreement (DOC, 71 KB) and submit it to IEEE for approval. 
• Proof of independent status provided by the worker must be attached. 
• If approved, the worker can be paid as an independent contractor. 
• If not approved, the worker must be paid as an IEEE employee and payroll taxes will be deducted from his or her gross compensation.  The IEEE Payroll Department will the process the payments to this employee.

This affects all IEEE units in the United States and also conferences held outside the United States that make payments to U.S. persons.  IEEE strongly suggests that “Temporary Agency” staff be used for administrative services since government agencies almost always determine that these are services typically performed by employees.

Section 31.3121(d)-1(c)(2) of the IRS regulations provides that generally the relationship of employer and employee exists when the person for whom the services are performed has the right to control and direct the individual who performs the services not only as to the results to be accomplished by the work but also as to the details and means by which the result is accomplished.
The IRS test for determining worker's employment status is called the common law test. It is the measure the IRS uses to determine whether the hiring firm has the right to control a worker on the job. The IRS has instructed its auditors to look at three areas for this determination. These are: 

1. behavioral control on the job,
2. financial control, and
3. the relationship with the worker.

1. Behavior Control
Factors that show whether a hiring firm has the right to control how a worker performs the specific tasks he or she has been hired to do. A worker will more likely be considered an independent contractor if he or she: 1) is not given instruction on how to do the work; 2) is not given training; and 3) is not evaluated on how the job is done.

2. Financial Control
Factor showing whether a hiring firm has a right to control a worker's financial life. A worker will more likely be considered an independent contractor if he or she: 1) has a significant investment in equipment and facilities; 2) pays business or travel expenses himself or herself; 3) makes his or her services available to the public; 4) is paid by the job; and 5) has opportunity for profit or loss (e.g. there is no opportunity for profit or loss if the worker is paid by the hour or is reimbursed for all expenses).

3. Relationship of the Worker and Hiring Firm
Factors showing whether hiring firm and the worker believe he or she is an independent contractor or an employee. A worker will more likely be considered an independent contractor if he or she: 1) is not provided with employee type benefits; 2) has signed an IEEE Independent Contractor Agreement (DOC, 71 KB) with the hiring firm; 3) is hired with the expectation that the working relationship will not continue indefinitely (e.g. Independent Contractor Agreement has a definite end date); and 4) performs services that are not a part of the hiring firm's regular business activities.

Generally, the IC to support independent status must provide two of the following examples of documentation:

• Copies of the IC's business license if required and any professional licenses the IC has such as a contractor's license.
• Certificates showing that the IC has insurance, including general liability insurance and workers' compensation insurance if the IC has employees.
• The IC's business cards and stationery.
• Copies of any advertising the IC has done, such as a Yellow Page listing.
• A copy of the IC's White Pages business phone listing, if there is one.
• If the IC is operating under an assumed name, a copy of the fictitious business name statement.
• The IC's invoice form to be used for billing purposes.
• A copy of any office lease and a photograph of the IC's office or workplace will also be helpful.
• The IC's unemployment insurance number issued by the state unemployment insurance agency (only IC's with employees will have these).
• Copies of 1099s issued the IC from other companies for which the IC has worked.
• The names and salaries of all assistants that the IC will use on the job.
• The names and salaries of all assistants the IC has used on previous jobs for the past two years and proof that the IC has paid them, such as copies of cancelled checks or copies of payroll tax returns.
• A list of all the equipment and materials the IC will use in performing the services and how much it costs; proof that the IC has paid for the equipment, such as copies of canceled checks, is very helpful.
• The names and addresses of other clients or customers for whom the IC has performed services during the previous two years; but don't ask for the identities of any clients the IC is required to keep confidential.

If the IC is a sole proprietor and will agree to do so, copies of the IC's tax returns for the previous two years showing that the IC has filed a Schedule C, Profit or Loss From a Business; this will show that the IC has been operating an independent business. Confidential and personal information can be redacted on any documents provided.

Please contact the IEEE Tax Department with any questions or comments regarding Independant Contractors: tax-compliance@ieee.org.