Tax
1099 vs. W-2
The two main classifications of workers — independent contractors (1099) vs. employees (W-2) — with very different tax, legal, and operational implications.
Definition
Misclassifying workers is one of the most common — and most expensive — small-business mistakes. The IRS and Wisconsin DOR both apply multi-factor tests focused on control, financial relationship, and the nature of the work. Getting it wrong triggers back taxes, penalties, and interest.
When It Matters
Before bringing on a new worker. After any change to how an existing worker actually operates.
Common Questions
Can I just pay someone as a 1099 if they prefer it?
No. Classification is determined by the facts of the relationship, not by what either party prefers. The worker's preference doesn't override the IRS tests.