Mississippi Administrative Code › Title 27 - STATE PERSONNEL BOARD › Part 100 › Chapter 8 - RULEMAKING AND DECLARATORY OPINIONS › APPENDICES › Appendix 27-100-8-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 §
										25-9-120(1).
					 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
					 §
										25-9-120.
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.