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Up to 4 quick questions, built on the IRS test, Department of Labor rules and your state's ABC test. It stops as soon as the answer is clear.
A simple orientation test, not legal advice. For a decision about a specific worker, talk to an employment attorney or tax advisor.
Location
Some states presume employment, which changes the starting point.
Control
Your business
Independence
Duration
Weighing your answers
Your result ·
Paying them as a 1099 contractor would be risky. Put them on payroll yourself, or use an Employer of Record. is strict about this.
This one could go either way. Have an employment lawyer or specialist look at it. is strict about this.
A contractor setup looks fine here. Keep the scope and deliverables in writing. is strict about this.
Prefer to set it up yourself? You'd register as an employer in , run payroll, and cover workers' comp. That usually takes weeks. See what requires
Prefer to set it up yourself? You'd register as an employer in , run payroll, and cover workers' comp. That usually takes weeks. See what requires
Managing several contractors? WorkGenius handles contracts and payments, and can move someone to W-2 within 24 hours if a role changes. Manage contractors with WorkGenius
A simple test based on your answers, not legal advice. Before you decide about a specific worker, check with an employment attorney or tax advisor.
US law looks at how the work actually happens, not what the contract says. For federal taxes, the IRS asks whether your company controls how the work is done, controls the business side of the job, and treats the relationship like a job. The Department of Labor asks whether the worker depends on you or runs their own business. Some states go further: in California, Massachusetts, New Jersey and Illinois, a worker is an employee unless you can prove all three parts of an ABC test.
Each answer adds weight toward W-2 employee or 1099 contractor, following how the official tests weigh each factor. The test stops as soon as the answer is clear, so most checks take two or three questions.
The state decides which test applies. California, Massachusetts, New Jersey and Illinois use ABC tests that presume the worker is an employee until the company proves otherwise, so in those states the test starts on the employee side.
U.S. Department of Labor: Comparison of State Unemployment Insurance Laws 2023, CoverageThis is control: the IRS behavioral control category, a core factor for the Department of Labor, and prong A of the ABC test. What counts is your right to direct the method, even if you rarely use it.
IRS: Independent contractor (self-employed) or employee?This is prong B of the ABC test and the "integral work" factor at the Department of Labor. It counts double in ABC states, because work inside your usual line of business is the prong most companies fail.
California Labor Code 2775 (AB 5 ABC test)This checks independence: prong C of the ABC test, the worker's opportunity for profit or loss at the Department of Labor, and IRS financial control. Under the Department of Labor's proposed rule, someone who can earn more only by working more hours looks like an employee.
U.S. Department of Labor: 2026 proposed rule on employee or independent contractor statusThis is permanence. The IRS asks whether the relationship will continue, and the Department of Labor counts indefinite or continuous work as a sign of employment. A defined project with an end date points the other way.
IRS: Independent contractor (self-employed) or employee?There is no single US test. Tax, wage and state laws each use their own, and a worker has to pass the strictest one that applies.
Federal income tax withholding, Social Security, Medicare and federal unemployment tax
The IRS weighs three categories of evidence: behavioral control (how the work is done), financial control (pay, expenses, tools, other clients) and the type of relationship (benefits, permanence, whether the work is a key part of your business). There is no set number of factors that decides it, and no single factor stands alone.
Federal minimum wage and overtime under the Fair Labor Standards Act
The question is whether the worker depends on you economically or is in business for themselves. The 2024 six-factor rule is still on the books, but the Department of Labor stopped applying it in its own investigations in May 2025 (Field Assistance Bulletin 2025-1). A rule proposed on February 27, 2026 would replace it with a test built on two core factors: control over the work and the opportunity for profit or loss. As of September 30, 2026, no final rule has been published.
State wage laws in California, Massachusetts and New Jersey, and unemployment insurance in about 20 states, including Illinois
The worker is an employee unless the company proves all three parts: (A) the worker is free from your control, (B) the work is outside your usual course of business, and (C) the worker runs an independently established business of the same kind. Failing any one part makes the worker an employee.
In these states the worker is presumed to be an employee, and the company has to prove otherwise.
Labor Code 2775 (AB 5)
Prong B is strict, with no alternative: the work must be outside the usual course of your business. The test covers the Labor Code, the Unemployment Insurance Code and the wage orders. Narrow exemptions exist for some professions and business-to-business arrangements, each with strict conditions.
Test a California worker Hiring in California California Labor Code 2775 (AB 5 ABC test)
M.G.L. c. 149, ยง 148B
As strict as California on prong B. The worker must be free from control both under the contract and in fact, and the employer carries the burden of proof. Violations can bring treble damages plus attorney's fees.
Test a Massachusetts worker Hiring in Massachusetts Mass.gov: Massachusetts law about independent contractors
N.J.S.A. 43:21-19(i)(6); N.J.A.C. 12:11
Applies to unemployment insurance, the Wage and Hour Law and the Wage Payment Law. Prong B can also be met if the work is done outside all of your places of business. New state regulations on the ABC test (N.J.A.C. 12:11) took effect on October 1, 2026.
Test a New Jersey worker Hiring in New Jersey New Jersey Department of Labor: ABC test regulations (N.J.A.C. 12:11), May 5, 2026
820 ILCS 405/212 (Unemployment Insurance Act)
A full ABC test for unemployment insurance, with the same "outside all places of business" alternative for prong B as New Jersey. Misclassification can bring 24% annual interest on unpaid contributions and personal liability for officers.
Test a Illinois worker Hiring in Illinois Illinois Department of Employment Security: Employee misclassification
What changes for your company depending on how the worker is classified.
| Topic | W-2 employee | 1099 contractor |
|---|---|---|
| Income tax withholding | You withhold federal, and usually state, income tax from every paycheck. | None. The contractor pays their own estimated taxes. |
| Social Security and Medicare (FICA) | You pay the employer's 7.65% share and withhold the employee's matching share. | None from you. The contractor pays self-employment tax. |
| Unemployment and workers' comp | You pay federal unemployment tax (6.0% on the first $7,000, usually 0.6% after the state credit), state unemployment tax and workers' comp. | Generally none, unless a state test treats the worker as your employee. |
| Forms | Form W-4 at hire, Form W-2 after year end. | Form W-9 at onboarding. Form 1099-NEC if you pay them $2,000 or more for payments made in 2026 (it was $600 before). |
| Benefits | Eligible for your benefit plans, plus state paid leave rules. | No employee benefits from you. |
| Control | You can direct how, when and where the work is done. | You agree on the result and deadline. They choose the method. |
| Minimum wage and overtime | FLSA and state wage rules apply unless the role is exempt. | Do not apply. You pay the agreed fee. |
If a contractor turns out to be an employee, the company owes what it would have paid, plus penalties. A few of the rules that set the bill:
If the IRS reclassifies a worker and the error was not intentional disregard, you owe income tax withholding at 1.5% of wages plus 20% of the employee's Social Security and Medicare tax. Those rates rise to 3% and 40% if you also did not file the 1099s. Your own employer share is owed in full, and intentional disregard removes the reduced rates.
If a misclassified worker was owed minimum wage or overtime under the FLSA, you can owe the unpaid amount plus an equal amount as liquidated damages, along with the worker's reasonable attorney's fees and costs.
Willful misclassification carries a civil penalty of $5,000 to $15,000 for each violation, or $10,000 to $25,000 for each violation if it is a pattern or practice. That comes on top of other penalties, and the company must post a public notice of the violation for a year.
The state can assess up to $250 per misclassified employee for a first violation and up to $1,000 per employee for later ones. It can also order you to pay the worker up to 5% of their gross earnings over the past 12 months.
As your Employer of Record, WorkGenius employs them on W-2 in any of the 50 states, handles payroll, taxes and workers' comp, and bills you one all-in markup on one weekly invoice. You keep directing the work.
No. If the working relationship is employment, the worker is an employee, however you pay them. Status comes from how the work happens: who controls it, whether they run their own business and whether the role is ongoing. The IRS says a company that treats an employee as a contractor without a reasonable basis may be liable for the employment taxes, and states add their own penalties.
There is no federal hour limit for contractors. Hours alone do not decide status. What matters is control and independence. A contractor working full-time, only for you, on a schedule you set, looks much more like an employee. The Department of Labor's 2026 proposed rule also treats a worker who can earn more only by working more hours as a sign of employment.
No law sets a time limit. Length is one factor among several. The IRS treats a relationship expected to continue indefinitely, rather than for a specific project or period, as evidence of employment, and the Department of Labor weighs permanence too. Renewing contract after contract for the same ongoing work can make a project look like a job.
No. A signed independent contractor agreement helps document the arrangement, but it does not decide status. The IRS says a contract label is not enough, and Massachusetts, New Jersey and Illinois require the worker to be free from control both under the contract and in fact. Agencies look at what actually happens day to day.
The ABC test is a state rule that treats a worker as an employee unless the company proves three things: (A) the worker is free from its control, (B) the work is outside its usual course of business, and (C) the worker has an independent business of the same kind. California, Massachusetts, New Jersey and Illinois use it, and many more states apply it to unemployment insurance.
California, Massachusetts and New Jersey use an ABC test for their wage laws, and California and Massachusetts use the strictest version. For unemployment insurance, about 20 states use a full ABC test, including Illinois, Connecticut, Maryland, Nevada and Washington, according to the Department of Labor's 2023 comparison of state laws.
Form SS-8 is how a business or a worker asks the IRS for an official decision on whether a worker is an employee or a contractor for federal employment taxes. The IRS reviews the facts and issues a determination, which can take at least six months. It covers federal taxes only, so state agencies can still apply their own tests.
Yes, at any time, including mid-year. You start withholding and payroll taxes from the conversion date, and issue a 1099-NEC for contractor payments made earlier in the year if they reach the reporting threshold. If you are not set up to run payroll in their state, an Employer of Record such as WorkGenius can employ them on W-2, typically within 24 hours of a signed offer.
This test is a general estimate based only on your answers. It is not legal or tax advice or a determination of any worker's status, so for a decision about a specific worker, consult an employment attorney or tax advisor, or ask the IRS for an official ruling with Form SS-8. Last reviewed September 2026.