Independent contractor or employee?

A recent congressional inquiry into whether Blackwater USA properly classified its security guards in Iraq and Afghanistan as independent contractors rather than employees highlights the often complicated application of provisions for determining this status. In its defense, Blackwater invoked the safe-harbor provisions of section 530 of the Revenue Act of 1978, among other arguments. To classify a particular worker as an independent contractor, the taxpayer cannot have treated the worker and others in substantially similar positions as employees for any prior period. To determine whether positions are substantially similar, analyze the relationship between the taxpayer and the worker, including duties, responsibilities, skills and knowledge required. The section 530 safe harbor does not apply to engineers, designers, drafters, computer programmers, system analysts or workers engaged in similar work.