ConstructionWorkers 123RF 3-22-2013During 2005, Kurek the sole proprietor of a home improvement company, worked on approximately 20 to 30 residential projects in Brooklyn, New York.

Kurek hired workers throughout the year and as you would expect, he supervised them, told them what work needed to be done, and set deadlines for the jobs. Everyone worked on a project-to-project basis.  Kurek paid each person a fixed fee set for each project.  The homeowners worked directly with Kurek.



The workers

  • set their own hours and work schedules,
  • provided their own transportation to the worksites,
  • used their own sets of small tools, with Kurek supplying larger tools
  • Kurek didn’t tell the workers how to do their jobs
  • Kurek replaced workers if a deadline was approaching or if a worker was holding up a job,
  • Kurek would order workers to repair problems or redo work if he felt it was being done improperly
  • Kurek didn’t provide training
  • Kurek didn’t offer employee benefits (e.g., sick pay or medical insurance), or carry unemployment insurance

Sound like the workers could be independent contractors?  

Not according to the IRS and the tax court, in TC Memo 2013-64 agreed.  Therefore Kurek was liable for employment taxes.

Courts evaluate whether a business has employees or independent contractors by considering the following 7 factors.

(1) the degree of control exercised by the principal;

(2) which party invests in work facilities used by the individual;

(3) the opportunity of the individual to realize a profit or loss;

(4) whether the principal can discharge the individual;

(5) whether the work is part of the principal’s regular business;

(6) the permanency of the relationship; and

(7) the relationship the parties believed they were creating.


Ultimately the court concluded that Kurek had employees because he exercised some control over the workers, he supplied the heavy tools and equipment, the workers were paid a flat fee regardless of the profitability of the jobs and the workers were integral to Kurek’s business.  This case illustrates that the relative weight of each factor is a subjective analysis and the results may not be intuitive.

Please contact me if I can help you determine how to hire and pay workers in your business. 

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