IRS 20 Factor Test: distinguish an independent contractor from an employee The 20 Factor Test remains valid but effective January 1, 2020 the IRS has "grouped\" factors and focuses on three areas of the control test: - Behavior Control; - Financial Control; and, - The type of Relationship of the Parties. Areas to examine in each Group: Behavior Control. Facts that show whether the business has a right to direct and control how the worker does the task for which the worker is hired include the type and degree of:\" - Exercise of direction over time and place and sequence or means of work; - Whose instrumentalities (tools or equipment) are used; - Engagement of other workers; . Whether specific duties are assigned to a specific worker; - Instructions that the business gives to the worker; - Training that the business gives to the worker. "Financial control. Facts that show whether the business has a right to control the business aspects of the worker's job includez" . Who pays unreimbursed business expenses; "Financial control. Facts that show whether the business has a right to control the business aspects of the worker's job includez\" - Who pays unreimbursed business expenses; - The extent of the worker's investment in facilities or tools used; - The extent to which the worker makes the services available to the relevant market; - How the business pays the worker (salary or wage vs. fee-based); - The extent to which the worker realizes profit or loss. "Type of relationship. Facts that show the parties' type of relationship include:\" - Existence and terms of a written contract; - Provision of benefits to worker; - Permanency of relationship; - Whether the services involved are a regular business activity of the employer. Internal Revenue Service. (2022, January 13). Publication 15-A Employer's supplemental tax guide. httpswww.irs.gov/pubiirs-pdffp15apdf Principals hire agents to represent them or act on their behalf in transactions with third parties. Agents agree to act ethically by being loyal and acting in the best interests of the principal. Agents also owe a duty to account for the principal's property and to obey reasonable instructions. In turn, the principal owes a duty to compensate the agent for services rendered or expenses incurred while acting on behalf of the principal. Because a disclosed agent (one who is known to act on behalf of a principal) may legally bind his/her principal to an agreement, it is important that the principal notify third parties once an agency relationship has ended. Principals must also carefully monitor agents to ensure they do not exceed the scope of their agency authority. Principals can be held liable for agent misconduct under the doctrine of respondeat superior. % Instructions a. Review the rubric to make sure you understand the criteria for earning your grade. b. In your textbook, The Legal Environment of Business, read Chapter 14, \"Agency and the Employment Relationship." c. Read: IRS 20 Factor Test. This is posted in the "Ask the Instructor" Forum C]. Read and analyze the following scenario: Cooke and Booker is an accounting firm. Mr. Cooke hired Jamal Richman to perform contract bookkeeping services for the firm's clients. Jamal works only on jobs assigned to him by Cooke and Booker. Jamal is paid a commission for the work; the commission was based on fees paid by the clients to Cooke and Booker. Jamal set his own fee scale. Jamal is paid when he earns a commission from the contract work. He uses the office space, equipment, and supplies at the firm. Mr. Cooke reviews Jamal's work and returns faulty work for corrections before delivering the work to clients. e. Using MS Word, write an APA formatted paper and discuss the following question based on the scenario above: a. Using the IRS 20 Factor Test, would you considerJamal an employee or an independent contractor? b. Discuss in detail how you have come to this conclusion. c. The paper should be at least 500 words. Three credible sources must be used and properly cited. f. When you have completed your assignment, save a copy for yourself and submit a copy to your instructor using the Assignment submission page by the end of the workshop