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Determine if a work arrangement looks more like employment or independent contracting based on IRS classification factors.
Based on the IRS three-factor test: behavioral control, financial control, and type of relationship.
Worker classification — whether someone is an employee or an independent contractor — has significant legal and financial consequences for both the worker and the hiring company. Misclassification can result in back taxes, penalties, and legal liability.
The IRS uses a three-factor test to determine classification: behavioral control (does the company control how you work?), financial control (do you have business-like independence?), and the type of relationship (is it permanent with benefits, or project-based?). No single factor is decisive — the IRS looks at the overall picture.
This tool walks you through the key questions from each category to help you understand how your arrangement would likely be classified.
The assessment asks nine questions across three IRS categories. For each question, your answer either points toward employee classification or contractor classification. The tool then tallies the factors and gives you an overall assessment.
Behavioral control questions test whether the company directs how, when, and where you work. Financial control questions test whether you operate like an independent business. Relationship questions test whether the arrangement looks permanent with benefits or temporary and project-based.
California
Uses the strict ABC test (AB5 law). A worker is an employee unless they are (A) free from company control, (B) performing work outside the usual business, AND (C) have an independent trade.
Texas
Generally follows the IRS common-law test. Texas Workforce Commission uses a similar multi-factor approach. Relatively employer-friendly.
New York
Uses a combination of common-law tests and the ABC test depending on context. Generally worker-friendly in classification disputes.
Florida
Follows the IRS common-law test for most purposes. No state income tax reduces some financial consequences of misclassification, but federal penalties still apply.
Illinois
Uses multiple tests depending on context. The Employee Classification Act targets construction industry misclassification with penalties up to $1,500 per violation per day.
The company may owe back employment taxes (Social Security, Medicare, unemployment), penalties, and interest. The worker may be entitled to back benefits, overtime pay, and workers compensation coverage.
Yes. Classification is determined per engagement, not per person. You can be a full-time employee at one company and an independent contractor for others simultaneously.
No. A contract labeling you as an independent contractor does not determine your actual classification. The IRS looks at the substance of the relationship, not what it is called on paper.
The IRS common-law test weighs multiple factors across three categories. The ABC test, used by states like California, requires ALL three conditions for contractor status: free from control (A), outside usual business (B), and independently established (C). The ABC test is much stricter.
Use a written Independent Contractor Agreement specifying project scope, payment terms, and the independent nature of the relationship. Maintain your own business entity, work for multiple clients, and provide your own equipment.
Form SS-8 asks the IRS to officially determine your worker classification. This is useful if you need clarity, but the IRS tends to favor employee classification. Consider consulting a tax professional before filing.
This tool provides general information, not legal advice. Laws vary by jurisdiction and individual circumstances. Consult a qualified attorney for advice specific to your situation.