IT contracting is a potential tax minefield for both client companies and contractors. Client companies relying on contractors to perform much of their development and maintenance run the risk of having those contractors considered as employees by the tax authority. Contractors have questions about deductions for various expenses, whether or not to incorporate, and many other issues.

Marblejar cannot give you tax advice. Instead, we can point you to the resources you need to make informed decisions. The right decisions can save you money and hassles, which is what Marblejar is all about.

In the world of U.S taxation, there is only one authority: the Internal Revenue Service. The IRS provides large quantities of information on every aspect of the individual and corporate tax codes. Then all you'll have to do is decipher it.

Due to popular demand, here's the 20 rule test the IRS uses to determine whether an individual is an employee or an independent contractor:

20-Factor Common Law Test
An individual need not meet all or even most of these tests to be classified as an employee. Some of the key factors are Nos. 1, 2, 6, 15, 16, 18 and 20.

To be classified as an employee, an individual:

1. Must comply with employer's instructions about the work.
2. May receive training from or at the direction of the employer.
3. Must provide services that are integrated into the business.
4. Must provide services that must be rendered personally.
5. May hire, supervise and pay employees for the employer.
6. Must have a continuing working relationship with the employer.
7. Needs to follow set hours of work.
8. Must work full-time for an employer.
9. Must do their work on the employer's premises.
10. Must do their work in a sequence set by the employer.
11. Needs to submit regular reports to the employer.
12. Must receive payments of regular amounts at set intervals.
13. Must receive payments for business and/or travel expenses.
14. Needs to rely on the employer to furnish tools and materials.
15. Must lack a major investment in facilities used to perform work.
16. Cannot make a profit or suffer a loss from their services.
17. Must work for one employer at a time.
18. Cannot offer their services to the general public.
19. Can be terminated by the employer.
20. May quit work at any time without incurring liability.