“Can I pay my helper on a 1099?” You can hand anyone a 1099. The form just does not decide anything. Whether a worker is your employee is settled by tests in federal and state law, and a helper who works on your crew, on your schedule, doing the work your company sells, will struggle to pass most of them. Get it wrong and the taxes you never withheld become yours, with more on top.
The Labor Department’s Fact Sheet 13 is blunt about it: “What the worker is called is not relevant.” A worker “who is paid off the books or receives a 1099 is not necessarily an independent contractor.” Signing an independent contractor agreement does not make someone one. And the place the work is done, whether the worker holds a state or local license, and the time or mode of pay do not decide it either.
Three tests, asked by different agencies
There is no single test. Different laws ask different questions, and a worker can pass one and fail another.
| Test | Used for | What it looks at |
|---|---|---|
| IRS common-law rules (Publication 15-A) | Federal income tax withholding, Social Security, Medicare and federal unemployment tax | Behavioral control (instructions, training), financial control (unreimbursed expenses, investment, offering services to the market, how the worker is paid, profit or loss) and the type of relationship (contracts, benefits, permanence, whether the work is a key part of your business) |
| Economic reality (Labor Department) | Federal minimum wage and overtime under the FLSA | Opportunity for profit or loss depending on managerial skill, investments, permanence, the nature and degree of control, whether the work is integral to your business, and skill and initiative |
| ABC test (for example, California and Massachusetts) | California: the Labor Code, the wage orders and unemployment insurance. Massachusetts: chapters 149 and 151 of its General Laws (labor and minimum wage) | All three must be true: free from your control, work outside the usual course of your business, and customarily engaged in an independently established business of the same kind |
The federal wage-law test is in motion. The 2024 rule behind Fact Sheet 13’s six factors is being challenged in court, and the fact sheet says it remains in effect for private lawsuits. In Field Assistance Bulletin 2025-1 (May 1, 2025), the Wage and Hour Division said it would stop applying that rule in its own investigations and would use the July 2008 version of Fact Sheet 13 instead. On February 26, 2026 the Department announced a new proposed rule on employee or independent contractor status; its rulemaking page shows that proposal, not a final rule. Both the 2008 and the 2024 versions of Fact Sheet 13 ask, among other things, who controls the work and whether the worker can make or lose money like a business.
Why the ABC test is hard on the trades
Prong B is the one that bites. California Labor Code §2775 asks whether “the person performs work that is outside the usual course of the hiring entity’s business.” Massachusetts General Laws chapter 149, §148B asks whether “the service is performed outside the usual course of the business of the employer.” A helper who carries shingles for a roofing company is doing exactly the roofing company’s usual work. It is hard to see how a 1099 changes that answer.
Massachusetts puts teeth behind its test. Under §148B(d), whoever fails to classify a worker properly, and in doing so fails to comply with the state’s wage, hour or tax withholding laws, is subject to the criminal and civil remedies the statute points to, including debarment.
California’s construction exception
California made room for genuine subcontractors. Labor Code §2781 says the ABC test does not govern a contractor and an individual working under a construction subcontract, and the older tests (§2750.5 and the Borello decision) apply instead, if the contractor shows all of the following:
Read it as a portrait of a real subcontractor: his own license, his own shop, his own crew, his own insurance. A helper who rides to the job in your truck meets almost none of it.
How the IRS sees construction workers
Publication 15-A includes building-industry examples worth reading in full. In one, an experienced tile setter uses his own tools and is paid by the piece, and he is still an employee: the company sets the order of the work and its specifications, supplies all the materials, inspects often and carries workers’ comp on him, and he has no place of business and does not seek similar work from others. In another, a licensed roofer who signs a flat-price contract, carries workers’ comp and liability insurance under his business name, hires roofers he treats as employees and pays for any repairs is an independent contractor.
Owning his tools and being paid by the piece did not make the tile setter a contractor. Running a business made the roofer one.
What a reclassification costs
IRS Publication 15 says that if you treated an employee as a nonemployee, you are generally liable for the Social Security, Medicare and income tax you did not withhold. You may be able to use the special section 3509 rates, which depend on whether you filed the required 1099s:
| Share of wages owed | You filed the 1099s | You did not |
|---|---|---|
| Social Security | 7.44% | 8.68% |
| Medicare | 1.74% | 2.03% |
| Federal income tax withholding | 1.5% | 3.0% |
| Total | 10.68% | 13.71% |
Say a helper was paid $40,000 last year on a 1099. At those rates the federal bill is $4,272 if you filed his 1099, or $5,484 if you did not. You cannot recover the employee’s share from him when the tax is paid under section 3509, and the rates are not available at all if you intentionally disregarded the withholding requirement.
That is only the federal payroll piece. Federal and state unemployment taxes come on top, and possibly a workers’ comp premium for a worker your policy never counted. And if he was owed overtime he never got, the FLSA makes the employer liable for the unpaid overtime “and in an additional equal amount as liquidated damages” (29 U.S.C. §216(b)).
If you have already got it wrong
A five-minute check for everyone you pay on a 1099
- Does he run a business: his own license where one is needed, his own insurance, other customers, a real chance to make or lose money on a job?
- Who decides when, where and how the work is done, and in what order? If you do, that points to employee.
- How is he paid: by the hour or the day, every week, with no end date? Or a set price per job, on his own invoice?
- Is his work the work your company sells? Under an ABC test that question alone can decide it.
- Which state are you in? Check its test with the state labor or unemployment agency.
If the answers point to employee, put him on payroll, and price what he really costs into your jobs: Your Real Hourly Cost: Working Out Labor Burden shows how. For real subcontractors, get the license number and certificate of insurance before the first payment, and keep them with the written subcontract.
General information, not legal or tax advice. Rules change and vary by state; check with the agency named above or a professional for your situation.