A worker that chooses to engage in business as a corporation presents a strong case for independent contractor status. When possible, the hiring party (payer) should use workers (payees) that are incorporated. While it is technically possible for an IRS or State auditor to reclassify an incorporated worker, in practice, that rarely happens. When presented with an incorporated worker, 98 percent of the time the IRS or State auditor will not disturb independent contractor treatment so long as the payer-firm had nothing to do with the incorporation by the worker.

There are several reasons:

• A corporation is a separate legal entity
• As a separate legal entity, a corporation operates only through its officer or officers
• Corporate officers are always employees of their corporation
• As an employee, the owner/officer/worker will receive an IRS Form W-2 from his or her corporation
• There is little or no reason, therefore, for an auditor to determine that the client should have issued a Form W-2 to the worker when the worker is already a W-2 employee of the worker's corporation
• The worker's corporation has presumably already paid employment taxes with respect to the officer/worker, i.e. Filed IRS Form W-2s, IRS Form 941 quarterly returns, and IRS Form 940 annual returns.