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Deciphering Employee vs. Independent Contractor

What an exciting time in your business, if you have gotten to the point where you need to add to your team!

Sometimes you can hire contractors (to outsource some work) but sometimes it makes better sense to hire an employee. We’ll go over the differences between ‘independent contractor’ and ‘employee’ from the IRS’s standpoint, so you have all the info you need to make the right choice for your business. Next week, we’ll talk about the money side of hiring one vs. the other.

The IRS has a 3-factor approach to determining who is an independent contractor vs. an employee. Those 3 factors are: Behavioral Control, Financial Control and Relationship of the Parties.


A worker is considered an employee if the business has the right to direct and control the work performed, even if that right isn’t exercised.

These are examples of behavioral control that would indicate the worker should be an employee:

  • The...

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DIY Bookkeeping Guide

Want to know what you should be doing each month until you're ready for a bookkeeper?