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Employee (W-2) or Independent Contractor (1099) – How do I know?

For IRS purposes, to identify of the “worker” is supposed to be an Employee or an Independent Contractor.  First, please answer all these questions in Y/N format:

  1. Is the worker exclusive to this employer and cannot work with others?
  2. Is the worker required to comply with employer’s instructions about when, where, and how to work?
  3. Is training required? Does the worker receive training from or at the direction of the employer, includes attending meetings and working with experienced employees?
  4. Are the worker’s services integrated with activities of the company? Does the success of the employer’s business significantly depend upon the performance of services that the worker provides?
  5. Is the worker required to perform the work personally?
  6. Does the worker have the authority to hire, supervise and pay assistants for the employer?
  7. Does the worker have a continuing relationship with the employer?
  8. Is the worker required to follow set hours of work?
  9. Does the worker required to work full-time for the employer?
  10. Does the worker perform work on the employer’s premises?
  11. Doe the workers use the company’s equipment?
  12. Does the worker perform work in a sequence set by the employer or follow a set schedule?
  13. Does the worker submit regular reports (written or oral) to the employer?
  14. Does the worker receive payments of regular amounts at set intervals?
  15. Does the worker receive reimbursement for business & travel expenses?
  16. Does the worker rely on tools and materials from employer?
  17. Has the worker made an investment in the facilities or equipment used to perform services?
  18. Does the worker have risk of loss and/or being unprofitable?
  19. Are the services offered to the employer unavailable to the general public?
  20. Can the worker be “fired” by the employer?
  21. Can the worker “quit” work at any time without liability?

From these 21 questions, you will have some answers “Yes” and some will be “No”.  There is no straight answer as to the number of Yes/No that will drive you to an answer.  The the more YES answers will drive you to considering this to be an EMPLOYEE.

Why does this matter? Well, employees cost more money than independent contractors; with payroll taxes, worker’s compensation, and/or other employee related benefits, they cost more… So most business owners want to avoid additional costs and will look to have independent contractors instead of employees, but it is not up to them, the IRS has strict rules around this!


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Hector Garcia

Hector Garcia

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