Associate Professional in Human Resources 2025 – 400 Free Practice Questions to Pass the Exam

The 20 Factor IRS Test is designed specifically to determine the classification of workers as independent contractors or employees for tax purposes. This test evaluates various factors that indicate the level of control and independence in the working relationship. It considers elements such as the degree of control over the work performed, the worker’s investment in facilities, the opportunity for profit or loss, and the nature of the relationship between the parties involved.

This test is critical because it helps to establish whether a worker has been correctly classified and, therefore, whether the employer is in compliance with tax laws. Misclassification can lead to significant legal and financial repercussions for businesses, making it essential for employers to accurately assess the status of their workers based on these factors.

Other options, while related to labor and employment, serve different functions. For example, the FLSA Test relates to minimum wage and overtime exemptions. The Department of Labor Compliance Test is focused on adherence to labor laws but does not specifically address contractor status. The Equal Employment Opportunity Test deals with anti-discrimination laws rather than worker classification. Hence, the 20 Factor IRS Test is the most suitable choice for determining the status of contractor workers.