IRS/entertainment Industry Agree on Worker Classification Guidelines
IRS recently published an industry-specific audit guide to be used by its agents when determining the proper classification of workers as employees or independent contractors. The TV commercial production and professional video communications industry (the "industry") negotiated with IRS to develop the guide that is ostensibly acceptable to both.
The guide weighs the twenty factors used by IRS in worker classification cases for typical situations found in that industry. The guide is helpful insofar as it highlights the seven factors considered most useful for worker classification in the industry. It is also sets an important pattern for other industry guides to be developed in the future.
However, by its terms, it only applies to the industry and, therefore, its usefulness as guidance to other industries limited. Also, the guide is controversial, because the Treasury Department was precluded from issuing regulations or revenue rulings on worker classification by section 530 of the Revenue Act of 1978.
The guide identifies three "critical factors" any of which cause a worker in this industry to be categorized as an employee. If none of the critical factors is present, the guide proceeds to a second level of analysis, focusing on four "significant factors" which are helpful for classifying workers in the industry. …