[Code of Federal Regulations]

[Title 26, Volume 14]

[Revised as of January 1, 2001]

From the U.S. Government Printing Office via GPO Access

[CITE: 26CFR31.3401(c)-1]

[Page 211-212]

TITLE 26--INTERNAL REVENUE

CHAPTER I--INTERNAL REVENUE SERVICE DEPARTMENT OF THE TREASURY--

(Continued)

PART 31--EMPLOYMENT TAXES AND COLLECTION OF INCOME TAX AT SOURCE--Table of Contents

Subpart E--Collection of Income Tax at Source

Sec. 31.3401(c)-1 Employee.

(a) The term employee includes every individual performing services

if the relationship between him and the person for whom he performs such

services is the legal relationship of employer and employee. The term

includes officers and employees, whether elected or appointed, of the

United States, a State, Territory, Puerto Rico, or any political

subdivision thereof, or the District of Columbia, or any agency or

instrumentality of any one or more of the foregoing.

(b) Generally the relationship of employer and employee exists when

the person for whom services are performed has the right to control and

direct the individual who performs the services, not only as to the

result to be accomplished by the work but also as to the details and

means by which that result is accomplished. That is, an employee is

subject to the will and control of the employer not only as to what

shall be done but how it shall be done. In this connection, it is not

necessary that the

[[Page 212]]

employer actually direct or control the manner in which the services are

performed; it is sufficient if he has the right to do so. The right to

discharge is also an important factor indicating that the person

possessing that right is an employer. Other factors characteristic of an

employer, but not necessarily present in every case, are the furnishing

of tools and the furnishing of a place to work to the individual who

performs the services. In general, if an individual is subject to the

control or direction of another merely as to the result to be

accomplished by the work and not as to the means and methods for

accomplishing the result, he is not an employee.

(c) Generally, physicians, lawyers, dentists, veterinarians,

contractors, subcontractors, public stenographers, auctioneers, and

others who follow an independent trade, business, or profession, in

which they offer their services to the public, are not employees.

(d) Whether the relationship of employer and employee exists will in

doubtful cases be determined upon an examination of the particular facts

of each case.

(e) If the relationship of employer and employee exists, the

designation or description of the relationship by the parties as

anything other than that of employer and employee is immaterial. Thus,

if such relationship exists, it is of no consequence that the employee

is designated as a partner, coadventurer, agent, independent contractor,

or the like.

(f) All classes or grades of employees are included within the

relationship of employer and employee. Thus, superintendents, managers

and other supervisory personnel are employees. Generally, an officer of

a corporation is an employee of the corporation. However, an officer of

a corporation who as such does not perform any services or performs only

minor services and who neither receives nor is entitled to receive,

directly or indirectly, any remuneration is not considered to be an

employee of the corporation. A director of a corporation in his capacity

as such is not an employee of the corporation.

(g) The term employee includes every individual who receives a

supplemental unemployment compensation benefit which is treated under

paragraph (b)(14) of Sec. 31.3401(a)-1 as if it were wages.

(h) Although an individual may be an employee under this section,

his services may be of such a nature, or performed under such

circumstances, that the remuneration paid for such services does not

constitute wages within the meaning of section 3401(a).

[T.D. 6516, 25 FR 13096, Dec. 20, 1960, as amended by T.D. 7068, 35 FR

17329, Nov. 11, 1970]