IRS classification guidelines

IRS classification guidelines determine how a worker is categorized—either as an employee, independent contractor, or other. This classification affects tax responsibilities, benefits, and legal protections. The IRS looks at factors like control over work methods, financial arrangements, and independence. For example, employees typically have taxes withheld by their employer and receive benefits, while independent contractors handle their taxes and work more independently. Proper classification ensures compliance with tax laws and avoids penalties. Businesses should carefully evaluate their workers’ roles based on IRS criteria to determine the correct classification.