In the previous article we established what does not settle it: the signed contract does not decide, and neither does the LLC the driver opened.
Óscar understood that. And then he asked the obvious question, which is probably the same one you have right now:
"Fine, so what do they actually look at?"
Here is the answer.
First: this is not a formula
The first thing to let go of is the idea that there is a checklist of requirements you either meet or do not. It does not work that way, and that expectation is exactly what confuses people.
The IRS evaluates the relationship as a whole, grouping the evidence into three areas: behavioral control, financial control and type of relationship. No single point outranks the others, there is no score that adds up, and the same element can carry a lot of weight in one case and none in another.
That sounds imprecise, and it is. But it makes sense once you understand what they are looking for: who is in charge of the work and who is risking the money. Everything else is a different way of answering those two questions.
Factor 1 · Behavioral control
The question: who decides how the work gets done?
An employee receives instructions on how to do things. An independent contractor delivers a result and decides the path himself.
Among other things, this gets looked at:
What kind of instructions you give. When to work, where to show up, which route to take, in what order to make deliveries, what equipment to use, where to fuel up.
How detailed they are. "This load has to be in Memphis by Thursday" is not the same as "you leave at 5, take I-40, fuel at the Pilot in Dickson and call me when you get there."
Whether you trained him. Teaching someone your way of doing the job is one of the clearest signals that you want it done your way. An independent contractor already knows how to do his work — that is why you hired him.
Whether you evaluate how he does it, not just the result. If you review his performance, his handling of customers or his driving, you are supervising the method.
The detail that catches most people off guard
Here is the part almost nobody knows, and it is the most important in this section.
What counts is the right to direct the work, even if you never use it.
Many owners say, in complete honesty: "I do not tell him anything, he knows what he is doing, he organizes himself." And it is true. But the question is not whether you give instructions — it is whether you could give them and he would have to follow them.
If tomorrow Óscar tells his driver "from now on you leave at six and you report in when you arrive," would the driver have to do it, or could he say no, that he works however he wants? If the answer is that he would have to do it, the right to direct exists — even though Óscar never used it.
A real independent contractor can say no.
Factor 2 · Financial control
The question: who is risking the money?
In the trucking business, this is the most revealing of the three. This gets looked at:
Significant investment. Who provided the equipment the work gets done with? In a box truck company the answer is almost always immediate: the truck belongs to the owner. An independent contractor normally invests in his own tools, and in this business the tool costs tens of thousands of dollars.
Unreimbursed expenses. Who pays the diesel, the maintenance, the tires, the insurance, the tolls? If all of that is on the owner, the worker is not carrying business costs: he is working with someone else's resources.
Opportunity for profit or loss. This is the cleanest test of them all. Can this worker have a bad month and lose money? Not earn less: lose. An independent contractor quotes a job, miscalculates, and ends up out of pocket. An employee, in the worst case, earns little. He never loses.
Whether he offers his services to the market. Does he advertise? Does he look for customers? Does he have other carriers he drives for? An independent business looks for work in several places. An employee has a job.
How he gets paid. A fixed payment per week, per day or per run —guaranteed, regardless of how the work turns out— looks like a salary. A quoted project payment, where the worker carries the risk of getting it wrong, looks like an invoice.
Factor 3 · Type of relationship
The question: how permanent and integrated is it?
Permanence. Does the relationship have an end date or is it indefinite? An independent contractor is hired for something with a beginning and an end. An employee is hired and stays.
Whether the work is the core activity of the business. This carries more weight than people think. If your company is a trucking company and you hire someone to haul, you are not buying an outside service — you are putting someone to work doing what your company does. That is different from hiring an accountant or a mechanic: those are outside services.
Benefits. If you give him insurance, paid vacation, sick days or any employee benefit, that is a strong signal. But be careful with the reverse reading: not giving them does not make him a contractor.
The written contract. It is taken into account, and that is why it is worth having. But it is one of the elements, not the one that decides.
The rule worth memorizing
No single factor decides on its own.
There is no element that saves you and none that condemns you. An element that is decisive in one relationship can be irrelevant in another. That is why you will not find anywhere a list saying "if you meet these five things you are fine" — because it does not exist.
What you can do is read the whole picture honestly. And in the box truck business, the whole picture tends to be fairly clear the moment you look at it head-on:
| Typical driver | Independent contractor | |
|---|---|---|
| The truck | The owner's | His own |
| Diesel and maintenance | Paid by the owner | Paid by him |
| Authority | The owner's | His own |
| Schedule and route | Decided by the owner | Decided by him |
| Other customers | None | Several |
| If the run goes badly | The owner loses | He loses |
| Duration | Indefinite | Per job |
The IRS is not the only one classifying
So far we have talked about the IRS. But it is not the only body that classifies workers.
The Department of Labor uses its own test, focused on the economic reality of the relationship. And each state applies its own criteria for unemployment and workers' compensation purposes.
They are different tests, and they can reach different conclusions about the same worker.
That means two things. First, passing one does not guarantee passing the others. Second, a single case can open fronts with several bodies at the same time — each with its own authority and its own timeline.
And this changes depending on where you operate: Tennessee, Texas, California and Florida do not treat the subject the same way. We will give that its own space later in this series.
"Can't I just ask them to tell me officially?"
Yes. There is Form SS-8, which asks the IRS to officially determine a worker's classification.
Before you rush to fill it out, two things worth knowing. First: this is not a matter of weeks. Second: you are asking them to review your case, so if the outcome is not what you hoped for, it is already on the table. It is a decision worth thinking through and not making alone, especially if several workers are in the same situation.
And there is a third one almost nobody knows:
What to do with this
You now have the framework. What follows is applying it to your case, and there is one step almost nobody takes that is worth more than all the others: put it in writing.
Not in your head — on paper. Who provided the truck. Who pays the diesel, the maintenance and the insurance. How payment was agreed and whether it is fixed. Whether he works for anyone else. Whether he has his own authority. Who decides the schedule and the route.
That document serves you either way: if your case is sound, it is your backup the day someone asks; and if something needs correcting, it is the starting point for doing it in an orderly way. Memory does not work as backup — paper does.
The operational part that comes next —registering your company as an employer, running payroll, filing the forms on time— that one we can take off your plate.
This content is informational and educational. It does not constitute individual legal or tax advice. A worker's classification is a determination that belongs to the business owner and, when the case is not clear, it is worth reviewing with an employment attorney.
