In theory, with a contractor, you should only be concerned with the results of the work, not the way in which it's performed. Though these rules are intended only as a guide-the IRS says the importance of each factor depends on the individual circumstances-they should be helpful in determining whether you wield enough control to show an employer-employee relationship.

Remember that when you hire an independent contractor, you should ask for and receive his or her own business card, as well as any statement for services rendered, showing the business name, separate phone or fax number and logo, if any, even a copy of an advertisement they placed in the local phone book--anything that evidences their independent status. In addition, keep available all Letters of Agreement, contracts or receipts tending to show or back-up the independent contractor relationship. The worker designated as an independent contractor should meet the IRS criteria, a set of twenty questions the IRS uses to make their determination of employment classification.

Keep in mind the loose checklist that follows is the best means of understanding how the IRS determines employee vs. independent contractor status. However, the checklist is intended as a guideline. The IRS will consider each occupation and the context of the situation. So, use these twenty questions to help you decide who is and who isn't an independent contractor.

Here are the 20 questions the IRS will use to determine if workers are company employees or true independent contractors. The IRS considers any "yes" answer to be evidence of an employer/employee relationship.

• Profit or loss. Can the worker make a profit or suffer a loss as a result of the work, aside from the money earned from the project? (This should involve real economic risk-not just the risk of not getting paid.)

• Investment. Does the worker have an investment in the equipment and facilities used to do the work? (The greater the investment, the more likely independent contractor status.)

• Works for more than one firm. Does the person work for more than one company at a time? (This tends to indicate independent contractor status, but isn't conclusive since employees can also work for more than one employer.)

• Services offered to the general public. Does the worker offer services to the general public?

• Instructions. Do you have the right to give the worker instructions about when, where, and how to work? (This shows control over the worker.)

• Training. Do you train the worker to do the job in a particular way? (independent contractors are already trained.)

• Integration. Are the workers services so important to your business that they have become a necessary part of the business? (This may show that the worker is subject to your control.)

• Services rendered personally. Must the worker provide the services personally, as opposed to delegating tasks to someone else? (This indicates that you are interested in the methods employed, and not just the results.)

• Hiring assistants. Do you hire, supervise, and pay the workers assistants? (independent contractors hire and pay their own staff.)

• Continuing relationship. Is there an ongoing relationship between the worker and yourself? (A relationship can be considered ongoing if services are performed frequently, but irregularly.)

• Work hours. Do you set the worker's hours? (Independent contractors are masters of their own time.)

• Full-time work. Must the worker spend all of his or her time on your job? (independent contractors choose when and where they will work.)

• Work done on premises. Must the individual work on your premises, or do you control the route or location where the work must be performed? (Answering no doesn't by itself mean independent contractor status.)

• Sequence. Do you have the right to determine the order in which services are performed? (This shows control over the worker.)

• Reports. Must the worker give you reports accounting for his or her actions? (This may show lack of independence.)

• Pay schedules. Do you pay the worker by the hour, week or month? (Independent contractors are generally paid by the job or on commission, although by industry practice, some are paid by the hour.)

• Expenses. Do you pay the worker's business or travel costs? (This tends to show control.)

• Tools and materials, Do you provide the worker with equipment, tools or materials? (independent contractors generally supply the materials for the job, and use their own tools and equipment.)

• Right to fire. Can you fire the worker? (An independent contractor can't be fired without subjecting you to the risk of a breach of contract lawsuit.)

• Worker's right to quit. Can the worker quit at any time, without incurring liability? (An independent contractor has a legal obligation to complete the contract.)

A yes to any of the above could indicate an employer/employee relationship.