Final answer:
The IRS does not use 'pay rate controls' as a guideline for determining employment status. Instead, they focus on behavioral controls, financial controls, and the nature of the relationship between the parties.
Step-by-step explanation:
The Internal Revenue Service (IRS) has outlined specific guidelines for determining whether an individual is categorized as an independent contractor or an employee. These guidelines are critical because they determine how the individual is taxed and what benefits they are entitled to. The IRS uses three primary categories to make this determination:
- Behavioral controls: These address whether the business has the right to direct and control how the work is done, through instructions, training, or other means.
- Financial controls: These look at aspects such as how the worker is paid, whether expenses are reimbursed, and who provides tools/supplies.
- The type of relationship that exists between the parties: This includes contracts, employee benefits, the permanency of the relationship, and the extent to which services provided are a key aspect of the business.
The option that is not one of the IRS guidelines is D. Pay rate controls. The IRS does not use pay rate as a criterion for determining the nature of the working relationship. Instead, they focus on whether the pay is by the job or by the time worked as part of their financial controls assessment rather than the amount of the pay itself.