Here’s new help if your company’s struggling to figure out exactly where you can draw the line between employees and independent contractors (ICs). In this case, a worker signed a contract stating she was an IC and that the company she worked for wasn’t responsible for withholding employment taxes.

The contract also said she was free to work for other companies. However, the worker did all of her work for the one company and didn’t even advertise for any other contracts.

As part of her work for the company, she attended mandatory training and got assignments and equipment from a supervisor. If any problems arose with company clients that she assisted, she was ordered to have a company manager resolve the issue.

So was she an employee or an IC?

Even though she was free to work for other companies, and theoretically to make a profit (or realize a potential loss) IRS said she was actually an employee because the company controlled virtually every aspect of the work she did.

Note: A private letter ruling only applies to the company that requested it. But it gives you a good idea of how IRS is thinking. (IRS Private Letter Ruling, No. 200813033.)

Tags: Independent contractor, IRS, Tax compliance, You make the call