Why Worker Classification Matters

Correct worker classification is critical for tax, legal, and compliance reasons. Misclassifying an employee as a contractor can lead to penalties, back taxes, and lawsuits. The IRS and Department of Labor use a “right to control” test to determine status.

How to Use This Calculator

Answer the questions based on your real working relationship. The tool evaluates three key areas:

Behavioral Control: Do you direct how work is done?
Financial Control: Who controls business aspects (tools, expenses, profit/loss)?
Type of Relationship: Is there a written contract? Is it ongoing?

IRS Guidelines Overview

The IRS uses a multi-factor test to assess whether you have the right to control what will be done and how it will be done. No single factor decides the outcome — the totality of the relationship matters.

Key Differences

Aspect	Employee	Independent Contractor
Control	High (sets hours, methods)	Low (self-directed)
Tools/Equipment	Provided by employer	Provided by worker
Tax Withholding	Employer withholds	Worker pays self-employment tax
Benefits	Eligible (health, retirement)	Not eligible
Relationship	Ongoing, indefinite	Project-based, temporary

State-Specific Rules

Some states have stricter tests:

California (AB5): Uses the "ABC Test" — burden on employer to prove contractor status
Massachusetts: Similar strict standard to CA
New Jersey: Follows "economic realities" test

What to Do If Unsure?

Use IRS Form SS-8 for official determination
Consult a labor attorney or CPA
Sign a clear independent contractor agreement
Document the working relationship thoroughly

Penalties for Misclassification

Back payroll taxes (Social Security, Medicare)
Unpaid overtime and benefits
Fines up to $1,000 per misclassified worker
Lawsuits for wrongful classification
Loss of business licenses in some states

Worker Classification Calculator

Do you control how, when, and where the work is performed?

Do you provide training to the worker?

Are the worker's services integral to your business operations?

Does the worker make a significant investment in tools or equipment?

Can the worker realize a profit or loss based on performance?

Is the worker available to provide services to the general public?

Do you set the worker's schedule or hours?

Do you provide the tools, materials, or workspace?

Is the relationship indefinite rather than project-based?

Do you pay the worker regularly (hourly/salary) instead of per project?

Can the worker hire assistants or subcontractors?

Is the worker subject to disciplinary actions?