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Classify Your Workers

Is your worker an Independent Contractor or an Employee?

Factors that the IRS considers while determining the classification of US workers:
  • Behavioral
  • Financial
  • Relationship of the parties
Take this quiz to check
Companies in the past have paid millions in penalties for misclassifying workers! Don’t be caught in the same trap. Quickly check your potential worker classification according to the IRS guidelines with our easy questionnaire, which will help you identify potential risks in your business.
Take this quiz to check
Note: The information provided is for general informational purposes only and does not constitute legal advice. You may contact the IRS to verify classification by filing Form S-8.
Discover the Difference

Independent Contractors vs Employee

According to the IRS a business might pay an independent contractor and an employee for similar work, but there are key differences between the two.
  • Behavioral control − Does the company have the right to control what the worker does and how the worker does the job?
  • Financial control − Does the business direct the financial aspects of the worker's job? Things like how the worker is paid, are expenses reimbursed, who provides tools/supplies, etc.
  • Relationship of the parties − Is there a written contract or employee type benefits such as pension plan, insurance, vacation pay?
Contractors Employees

Employment Status
Self-employed
Works for a Company

Working Hours 
Flexible
Fixed set of hours as per contract/ company policies

Tax Responsibility 

Responsible for their own taxes, based on the structure they work through 
Company withholds taxes (income, NI, pension, etc.)

Employment Rights

Not eligible
Most likely eligible

Number of clients 
May have multiple clients, most likely not at once

Generally, work for a single company at a time 
Pitfalls

Why Should You Avoid Misclassifying Workers?

Here’s a list of issues faced by business owners/ employers that can result from misclassifying workers:
  • Legal liabilities: Potential fines, penalties, and lawsuits from workers or government agencies.
  • Tax consequences: Back taxes, penalties, and interest for failing to withhold and pay employment taxes.
  • Benefit obligations: Additional costs for providing benefits like health insurance and retirement plans to misclassified employees.
  • Labor law violations: Risk of violating minimum wage, overtime pay, and other labor laws.
  • Reputation damage: Negative publicity and damage to relationships with employees, customers, and stakeholders.

Did You Know?

At least 10% to 30% of audited employers misclassify their employees as independent contractors in the U.S. alone.

Source: National Employment Law Project

Employers, Ready to Find Out Your Worker Classification?

Take this quiz to know
Employment tax obligations
Ready for the next step?

Once a determination is made, the next step is filing the appropriate forms and paying the associated taxes. 

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FAQs
Have Doubts About Our Questionnaire?
How to use this Tax1099’s Worker Classification questionnaire?

There are a series of 13 questions to help you determine your worker’s classification. All questions are required to be answered to get the result.

For whom is this questionnaire designed?

This questionnaire is primarily designed for all the employers who want to identify whether their workers are independent contractors or employees. Please note that it is set according to IRS guidelines for classifying workers residing in the USA and does not cover any US Department of Labor or the regulations required by any State agency.

How does the worker classification determine whether a worker is an employee or an independent contractor?

The analyzer evaluates factors such as behavioral control, financial control, and the type of relationship between the employer and the worker, aligning with IRS guidelines.