Question

Patrick has a written independent contractor agreement with his broker Tami. Last year, about 25% of his income came from sales commissions. The other 75% came from an hourly wage paid by Tami. For income tax purposes, the IRS would probably classify Patrick as:

Answer 1

Answer:

independent contractor

Explanation:

The IRS uses the following 3 criteria to determine if a worker is an employee or not:

1. Behavioral: does the employer control what the worker does? if +, employee
2. Financial: does the employer have control over how and what amount a worker is paid? if +, employee
3. Type of Relationship: Does the worker have any written contract or any does he/she receive any type of benefits? Does the relationship between the employer and the worker permanent? If +, employee

Apparently Patrick would fit quite well into the criteria of being an employee, but since he has a written agreement that states that he is an independent contractor, then that is how he should be classified. Also, it must be considered how Patrick pays his taxes, but we were not given that information.

Some states use a more strict parameter to determine if a worker is an employee, but that is not the case here.