EMPLOYEE

INDEPENDENT

CONTRACTOR

OR

IRS Tax Publications

If you are not sure whether you are an employee or an 

independent contractor, get Form SS-8, Determination 

of Worker Status for Purposes of Federal Employment 

Taxes and Income Tax Withholding. Publication 15-A, 

Employer’s Supplemental Tax Guide, provides additional 

information on independent contractor status.

IRS Electronic Services

You can download and print IRS publications, forms, and 

other tax information materials on the Internet at www.irs.

gov. You can also call the IRS at 1-800-829-3676 (1-800-

TAX-FORM) to order free tax publications and forms.

Call 1-800-829-4933, the Business and Speciality Tax 

Line, if you have questions related to employment tax 

issues.

Publication 1779 (Rev. 3-2023) Catalog Number 16134L

Department of the Treasury Internal Revenue Service

www.irs.gov
Independent Contractor or Employee

Which are you?

For federal tax purposes, this is an important distinction. Worker classification affects how you pay your federal income tax, 

social security and Medicare taxes, and how you file your tax return. Classification affects your eligibility for social security 

and Medicare benefits, employer provided benefits and your tax responsibilities. If you aren’t sure of your work status, you 

should find out now. This brochure can help you.

The courts have considered many facts in deciding 

whether a worker is an independent contractor or an 

employee. These relevant facts fall into three main 

categories: behavioral control; financial control; and 

relationship of the parties. In each case, it is very 

important to consider all the facts – no single fact provides 

the answer. Carefully review the following definitions.

Behavioral Control

These facts show whether there is a right to direct or 

control how the worker does the work. A worker is an 

employee when the business has the right to direct and 

control the worker. The business does not have to actually 

direct or control the way the work is done – as long as the 

employer has the right to direct and control the work. For 

example:

Instructions – if you receive extensive instructions 

on how work is to be done, this suggests that you are 

an employee. Instructions can cover a wide range of 

topics, for example:

• how, when, or where to do the work

• what tools or equipment to use

• what assistants to hire to help with the work

• where to purchase supplies and services

If you receive less extensive instructions about what 

should be done, but not how it should be done, you 

may be an independent contractor. For instance, 

instructions about time and place may be less important 

than directions on how the work is performed.

Training – if the business provides you with training 

about required procedures and methods, this indicates 

that the business wants the work done in a certain way, 

and this suggests that you may be an employee.

Financial Control

These facts show whether there is a right to direct or 

control the business part of the work. For example:

Significant Investment – if you have a significant 

investment in your work, you may be an independent 

contractor. While there is no precise dollar test, the 

investment must have substance. However, a significant 

investment is not necessary to be an independent 

contractor.

Expenses – if you are not reimbursed for some or all 

business expenses, then you may be an independent 

contractor, especially if your unreimbursed business 

expenses are high.

Opportunity for Profit or Loss – if you can realize 

a profit or incur a loss, this suggests that you are 

in business for yourself and that you may be an 

independent contractor.

Relationship of the Parties

These are facts that illustrate how the business and the 

worker perceive their relationship. For example:

Employee Benefits – if you receive benefits, such as 

insurance, pension, or paid leave, this is an indication 

that you may be an employee. If you do not receive 

benefits, however, you could be either an employee or 

an independent contractor.

Written Contracts – a written contract may show what 

both you and the business intend. This may be very 

significant if it is difficult, if not impossible, to determine 

status based on other facts.

When You Are an Employee...

. Your employer must withhold income tax and your 

portion of social security and Medicare taxes. Also, 

your employer is responsible for paying social security, 

Medicare, and unemployment (FUTA) taxes on your 

wages. Your employer must give you a Form W-2, 

Wage and Tax Statement, showing the amount of 

taxes withheld from your pay.

When You Are an Independent 

Contractor...

. The business may be required to give you Form 

1099-MISC, Miscellaneous Income, to report what it 

has paid to you.

. You are responsible for paying your own income 

tax and self-employment tax (Self-Employment 

Contributions Act – SECA). The business does not 

withhold taxes from your pay. You may need to make 

estimated tax payments during the year to cover your 

tax liabilities.

. You may deduct business expenses on Schedule C of 

your income tax return.