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What is economic reality test?

Updated: 4/28/2022
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11y ago

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The economic Reality Test is a test used by courts to further determine between an employee and an independent contractor. They use this mainly to determine if payroll taxes should have been paid on a person working for a business. If the contractor end up being classified as an employee, the business owes payroll taxes on the money paid to that person. If the person is determined to be an independent contractor, then the person owes income taxes on the money paid to them.

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