Well, then the case could be made that they were incorrectly being treated as employees and should have in fact been contractors. The IRS looks at the common l

Well, then the case could be made that they were incorrectly being treated as employees and should have in fact been contractors. The IRS looks at the common law rules between the two entities, based on three categories: Behavioral: http://www.irs.gov/businesses/small/article/0,,id=179111,00.html http://www.irs.gov/businesses/small/article/0,,id=179111,00.... Financial: http://www.irs.gov/businesses/small/article/0,,id=179113,00.html http://www.irs.gov/businesses/small/article/0,,id=179113,00.... Type of Relationship: http://www.irs.gov/businesses/small/article/0,,id=179116,00.html http://www.irs.gov/businesses/small/article/0,,id=179116,00.... There is even an IRS form, SS-8, which you can submit to the IRS to 'clarify' how the relationship should be treated... http://www.irs.gov/pub/irs-pdf/fss8.pdf http://www.irs.gov/pub/irs-pdf/fss8.pdf All of this information is available here: http://www.irs.gov/businesses/small/article/0,,id=99921,00.html http://www.irs.gov/businesses/small/article/0,,id=99921,00.h...