Can the IRS decide if a worker is an employee despite the presence of a signed agreement stating they are an independent contractor?

The IRS has the authority to determine whether a worker is classified as an employee or an independent contractor, regardless of any signed agreements that may state the worker is an independent contractor. The classification is not solely based on the presence of a contract but rather on the nature of the relationship between the worker and the employer.

The IRS looks at various factors to make this determination, which include the level of control that the employer has over the worker, the worker's independence, and the degree of financial control the worker has in their job. If the circumstances indicate that the worker is functioning more like an employee than an independent contractor, the IRS can reclassify that worker and apply the associated tax implications.

This authority emphasizes the importance of the actual working relationship over the formal agreements made by the parties. Hence, even if a signed agreement indicates independent contractor status, the IRS's evaluation can lead to a different conclusion, reinforcing that the classification depends on multifaceted criteria rather than just a contractual label.