Independent Contractor vs. Employee Checklist for 1099 Filing Accuracy

Correctly classifying your workers is more than just a paperwork exercise — it’s a critical compliance step that affects taxes, reporting obligations and liability. With federal and state agencies taking a closer look at worker classification, it’s important to understand where the line is drawn between an independent contractor and an employee.

Use this contractor vs. employee checklist to assess your compliance and reduce the risk of misclassification. While the exact rules vary depending on which agency is involved (such as the IRS, the Department of Labor or state tax authorities), all rely on a set of behavioral, financial and relationship-based factors to evaluate the working arrangement. No single factor determines status; instead, the overall nature of the relationship is considered.

Independent Contractor vs. Employee Checklist

1. Is the work being performed outside the scope of your core business operations?
   
   Yes No
2. Has the worker provided a business Employer Identification Number (EIN) instead of a Social Security number?
   
   Yes No
3. Does the worker operate independently, without ongoing training or day-to-day supervision?
   
   Yes No
4. Is the individual engaged for clearly defined projects with specific deliverables?
   
   Yes No
5. Does the worker set their own schedule and hours?
   
   Yes No
6. Does the worker use their own tools, equipment or workspace?
   
   Yes No
7. Does the worker provide services to other clients or businesses?
   
   Yes No
8. Is the worker compensated on a per-project basis, rather than with regular wages?
   
   Yes No
9. Are payments made based on invoices and treated as accounts payable — not payroll?
   
   Yes No
10. Does the worker cover their own business-related expenses?
    
    Yes No
11. Is there a written agreement in place identifying the individual as an independent contractor?
    
    Yes No
12. Will you issue a Form 1099 to the worker at year-end for tax reporting purposes?
    
    Yes No

Interpreting the Results

To support a legitimate independent contractor relationship, most of your answers should be “Yes.” The strongest indicators involve independence, such as control over work schedule, provision of tools or workspace, and the ability to take on other clients. These day-to-day details typically carry the most weight in an audit or review.

Need help understanding how this impacts your filing obligations? Check out our guide to the 1099-NEC form — a key tax form used to report payments to independent contractors.

For additional guidance, explore our other independent contractor articles, including:

• What Documents Are Needed to Legally Establish Independent Contractor Status?
• The High Cost of Misclassifying Workers
• Working with Independent Contractors: Know the IRS Rules and Regulations

Worker classification can be complex, but this independent contractor vs. employee checklist is a practical first step in evaluating risk and protecting your business. When in doubt, consult with a tax professional to ensure compliance with current IRS and state guidelines.

Updated: 06/20/2025