Mississippi Administrative Code › Title 12 - Finance and Administration › Part 9 - Office of Personal Service Contract Review Rules and Regulations › APPENDICES › Appendix 12-9-B - Independent Contractor/Contract Worker Determination

Current through June 25, 2024
Administrative Procedures
IRS Code stipulates that compensation paid to contractual
				  workers is subject to the same federal employment tax requirements as that of
				  salaried workers. The IRS categorizes contractual personnel as either
				  independent contractors or employees for the purpose of withholding and paying
				  employment taxes. Generally, while independent contractors are responsible for
				  the proper payment of employment taxes for themselves and their employees, the
				  contracting agency is responsible for withholding and paying employment taxes
				  for those contract personnel determined not to be (nor working for) an
				  independent contractor. The State of Mississippi has a more narrow definition
				  of "employee" than that used in the IRS regulation. Mississippi statute states
				  that an "employee" is any person legally occupying a position in state service.
				  Mississippi Code Annotated §
									27-104-7.
				  In order to prevent potential confusion caused by IRS terminology and
				  Mississippi statutory terminology, contractual personnel determined not to be
				  (nor working for) independent contractors will be referred to as "contract
				  workers." Therefore, contractual personnel who do not meet the definition of
				  independent contractors should be classified as contractual workers and subject
				  to the proper withholding of employment taxes. See Mississippi Code Annotated
				  §
									27-104-7(5).
Agency and institutional heads are responsible for
				  determining what work is being performed by contractual workers and ensuring
				  that proper procedures are followed to comply with the IRS Code. Prior to entry
				  and submission of the "Request for Contract Personnel Services Approval" form,
				  each contractor should be classified using the criteria referenced below. If
				  the contractor fails to qualify for classification as an independent
				  contractor, then the contractor must be treated as a contractual worker. The
				  department or agency should give consideration to the contract type. If the
				  contractor is classified as a contractual worker, the agency is liable for the
				  employer's share of employment taxes. In budgeting for the contract, the
				  department should allow for this additional cost.
Please refer to the Department of Finance and Administration
				  for instructions concerning the accounting codes and proper withholding of
				  federal and state income taxes, Social Security/Medicare matching funds and
				  unemployment insurance taxes. Refer also to IRS Publication 15-A, 2015 Edition
				  (available for downloading from http://www.irs.gov/pub/irs-pdf/p15a.pdf). The
				  IRS has eleven main tests, organized into three main groups, to determine
				  whether an employer-employee relationship exists, or whether the contractor is
				  an independent contractor. These tests replace the IRS's previous "Twenty
				  Factors" test.
I.
BEHAVIORAL CONTROL
Facts that show whether the business has a right to direct
				  and control how the worker does the task for which the worker is hired include
				  the type and degree of:
Instructions the business gives to the worker.
An employee is generally subject to the business'
				  instructions about when, where, and how to work. All of the following are
				  examples of types of instructions about how to do work:
* When and where to do the work.
* What tools or equipment to use.
* What workers to hire or to assist with the work.
* Where to purchase supplies and services.
* What work must be performed by a specified
				  individual.
* What order or sequence to follow.
The amount of instruction needed varies among different
				  jobs. Even if no instructions are given, sufficient behavioral control may
				  exist if the employer has the right to control how the work results are
				  achieved. A business may lack the knowledge to instruct some highly specialized
				  professionals; in other cases, the task may require little or no instruction.
				  The key consideration is whether the business has retained the right to control
				  the details of a worker's performance or instead has given up that right.
Training the business gives to the worker.
An employee may be trained to perform services in a
				  particular manner. Independent contractors ordinarily use their own
				  methods.
II.
FINANCIAL CONTROL
Facts that show whether the business has a right to control
				  the business aspects of the worker's job include:
The extent to which the worker has unreimbursed
				  business expenses.
Independent contractors are more likely to have unreimbursed
				  expenses than are employees. Fixed ongoing costs that are incurred regardless
				  of whether work is currently being performed are especially important. However,
				  employees may also incur unreimbursed expenses in connection with the services
				  they perform for their employer.
The extent of the worker's investment.
An independent contractor often has a significant investment
				  in the facilities he or she uses in performing services for someone else.
				  However, a significant investment is not necessary for independent contract
				  status.
The extent to which the worker makes his or her
				  services available to the relevant market.
An independent contractor is generally free to seek out
				  business opportunities. Independent contractors often advertise, maintain a
				  visible business location, and are available to work in the relevant market.
How the business pays the worker.
An employee is generally guaranteed a regular wage amount
				  for an hourly, weekly, or other period of time. This usually indicates that a
				  worker is an employee, even when the wage or salary is supplemented by a
				  commission. An independent contractor is often paid a flat fee or on a time and
				  materials basis for the job. However, it is common in some professions, such as
				  law, to pay independent contractors hourly.
The extent to which the worker can realize a profit or
				  loss.
An independent contractor can make a profit or loss.
III.
TYPE OF RELATIONSHIP
Facts that show the parties' type of relationship include:
Written contract describing the relationship the
				  parties intended to create.
Whether or not the business provides the worker with
				  employee-type benefits, such as insurance, a pension plan, vacation pay, or
				  sick pay.
The permanency of the relationship.
If you engage a worker with the expectation that the
				  relationship will continue indefinitely, rather than for a specific project or
				  period, this is generally considered evidence that the intent was to create an
				  employer-employee relationship.
The extent to which services performed by the worker
				  are a key aspect of the regular business of the company.
If a worker provides services that are a key aspect of your
				  regular business activity, it is more likely that you will have the right to
				  direct and control his or her activities. For example, if a law firm hires an
				  attorney, it is likely that it will present the attorney's work as its own and
				  would have the right to control or direct that work. This would indicate an
				  employer-employee relationship.
Note:
IRS Help
. If you want the IRS to
				  determine whether or not a worker is an employee, file form SS-8, Determination
				  of Worker Status for Purposes of Federal Employment Taxes and Income Tax
				  Withholding, with the IRS.