Although legal precedent and published literature have attempted to standardize the criteria used to distinguish between employees and independent contractors, there is by no means an objective foundation. It would not be at all unusual for an IRS auditor to reach an entirely different conclusion from the same facts and circumstances.
To limit a company’s exposure, it is advisable to consult with your tax professional before classifying any workers as independent contractors.
In gray area cases, the added step of requesting an IRS determination as to a worker’s proper classification can potentially avoid future tax penalties, interest, and legal costs.
To request a determination, file Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding. Supplement the form with pertinent information based on the criteria outlined in the IRS 20-Factor test and common law rules as you believe they apply to your company relationship with the worker (or class of workers) for whom ruling is requested. It should be prepared or at least reviewed by your tax professional.