Classifying a Worker

The degree of control and independence in your relationship determines if a worker is an employee or an independent contractor. 

A worker is your employee if you have the right to control the details of how the worker performs services, even when you give the employee freedom of action. 

A worker is an independent contractor if you have the right to control or direct only the result of the work and not how to work is performed. Independent contractors pay self-employment tax on their earnings.

The Minnesota Department of Revenue considers many factors falling into three broad categories:

• Behavioral Control: Do you (the business) have a right to direct or control how the work is being done? This control may happen through instruction, training, or other means.
• Financial Control: Do you have a right to direct or control the financial and business aspects of the worker’s job?
• Relationship of the Parties: How do you and the worker perceive your relationship?

You must weigh all relevant factors when determining if someone is an employee or independent contractor. Some factors may indicate a worker is an employee, while others indicate they are an independent contractor.

For details:

• See Withholding Fact Sheet 8 – Independent Contractor or Employee.
• See “Independent Contractor or Employee?” on the IRS website.

The IRS can help you or your worker determine their worker status.

1. Complete or have your worker complete federal Form SS-8 and submit it to the IRS
2. Send a copy of the completed Form SS-8 to us
3. Once you receive the IRS’s written determination, send us a copy:

Minnesota Department of Revenue
Mail Station 6501
600 N. Robert St.
St. Paul, MN 55146-6501

Note: If you incorrectly classify an employee as an independent contractor, you must pay employment tax equal to 3% of the misclassified worker’s compensation plus any penalties and interest.