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What decides whether a US worker is a 1099 contractor or a W-2 employee?
The IRS decides contractor versus employee status by how far the business has the right to direct and control the worker. There is no set number of factors — you weigh the whole relationship, not one item.
What the IRS weighs
- Behavioral. Does the company control, or have the right to control, what the worker does and how the worker does the job?
- Financial. Are the business parts of the worker’s job controlled by the payer — how they are paid, whether expenses are reimbursed, who provides tools?
- Type of relationship. Are there written contracts or employee-type benefits? Will the relationship continue, and is the work a key part of the business?
The IRS says some factors may point to employee and others to contractor, that factors relevant in one situation may not be relevant in another, and that the business should document the factors it used.
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Related questions
- Does a written contract settle the classification?
- No. A written contract is evidence within the type-of-relationship category, not the decider. The IRS weighs the whole relationship.
- Is there a number of factors that settles it?
- The IRS states there is no magic or set number of factors, and that the relevant factors vary by situation.
What this answer does not cover
- This is the IRS test for federal tax purposes. Other federal agencies and individual states apply their own classification tests, which this page does not cover.
- This page describes how the test works, not how it applies to any particular working arrangement.