- Tax form
- Form 1099-NEC (the worker gives the client a Form W-9 first)
- 1099-NEC threshold
- $2,000 for payments made in 2026 ($600 for earlier years)
- Self-employment tax
- 15.3% on 92.35% of net earnings, owed from $400
- Federal tests
- IRS common-law test (taxes); DOL economic reality test (wage and hour)
- California test
- ABC test (AB5, Labor Code 2775), with Borello exemptions
- Also called
- 1099 worker, freelancer, self-employed contractor
Key characteristics
Controls how the work is done The client sets the result it wants. The contractor decides the method, the hours and, often, the place.
Paid per job, not on payroll Pay comes from an invoice or a flat fee per event, and the client reports it on Form 1099-NEC instead of a W-2.
Pays their own taxes Nothing is withheld. The contractor owes income tax and self-employment tax, usually through quarterly estimated payments.
Outside wage-and-hour law Federal minimum wage and overtime rules under the FLSA cover employees, not genuine contractors.
No employee benefits or insurance No employer health plan, workers' compensation or unemployment insurance coverage through the client.
Runs a business of their own Brings their own tools, sets their own rates, can turn work down and usually serves several clients.
Independent contractor (1099) vs related terms
Form 1099-NEC: who files it, the threshold and the deadline
The business that pays a contractor files Form 1099-NEC (nonemployee compensation). For payments made in 2026, the form is required once a contractor is paid $2,000 or more in the year; for earlier years the threshold was $600. The 2025 federal tax law raised it, and the IRS instructions for Form 1099-NEC reflect the new figure.The payer sends a copy to the contractor and files it with the IRS by January 31 of the following year. Before the first payment, the contractor fills in Form W-9 with a name and taxpayer ID. If no valid ID is provided, the payer must apply backup withholding (24%) to the payments.
- Form W-9: contractor to client, before work starts
- Form 1099-NEC: client to contractor and IRS, by January 31
- Income below the threshold is still taxable to the contractor
How does the IRS decide? The common-law test
For federal taxes, the IRS treats a worker as an independent contractor when the payer has the right to control or direct only the result of the work, not what will be done or how. The label in a contract does not decide it; the facts of the working relationship do.The common-law test weighs three groups of evidence, and no single factor settles the question. A business or worker can ask the IRS for an official ruling on Form SS-8, which can take six months or more. Businesses that want to reclassify contractors as employees going forward can apply to the Voluntary Classification Settlement Program (Form 8952) for partial relief on past federal employment taxes.
- Behavioral control: does the business direct what the worker does and how, through instructions, training or set procedures?
- Financial control: who sets the pay, who covers expenses and tools, and can the worker make or lose money on the job?
- Type of relationship: written contracts, benefits, how permanent the arrangement is, and whether the work is a key part of the business.
How does the DOL decide? The economic reality test
For minimum wage and overtime under the Fair Labor Standards Act, the U.S. Department of Labor asks whether the worker is in business for themselves or economically dependent on the hiring business. The formal regulation is the 2024 rule, which weighs six factors as a whole: opportunity for profit or loss, investment, permanence, control, whether the work is integral to the business, and skill and initiative.That rule is under revision. Since May 2025, Field Assistance Bulletin 2025-1 has told DOL investigators to apply the earlier test in enforcement. On February 26, 2026, the DOL proposed rescinding the 2024 rule and returning to a framework close to the 2021 version, with two core factors (control over the work, and opportunity for profit or loss) and other guideposts such as skill, permanence and integration. Comments closed on April 28, 2026. Check the DOL Wage and Hour Division for whether a final rule has taken effect. States can apply stricter tests of their own.
California: the ABC test (AB5) and its exemptions
In California, a worker is presumed to be an employee under Labor Code section 2775 (the AB5 law). The hiring business must prove all three parts of the ABC test for contractor status to hold. The California Department of Industrial Relations summarizes the rules and exemptions.Some work is exempt from the ABC test and judged under the older Borello multifactor test instead. Exemptions relevant to events include business-to-business arrangements (written contract, separate business location, other clients, own tools, own hours and rates), still photographers, photojournalists and videographers (with conditions), and a single-engagement event between two individuals: a stand-alone, non-recurring event at one location, or a series at the same location no more than once a week. Each exemption has conditions, so check the DIR page. California businesses that pay contractors and file a 1099-NEC or 1099-MISC must also report them to the EDD through Independent Contractor Reporting.
- A: the worker is free from the hiring business's control and direction, in the contract and in practice.
- B: the work is outside the usual course of the hiring business's business.
- C: the worker is customarily engaged in an independently established trade or business of the same kind.
Self-employment tax: what contractors pay
Because no employer pays half of Social Security and Medicare, contractors pay both halves as self-employment tax: 15.3% (12.4% Social Security plus 2.9% Medicare), applied to 92.35% of net self-employment earnings. It is owed once net earnings reach $400 in a year, is figured on Schedule SE, and half of it is deductible. The Social Security part stops at an annual wage base that changes each year.Income tax comes on top. Since nothing is withheld, most contractors make quarterly estimated payments and deduct business costs such as uniforms, tools, mileage between gigs and equipment.
Can event staff be independent contractors?
Sometimes, and it depends on the role and the state. A freelance photographer, DJ or AV specialist who runs their own business, sets their own rates, brings their own gear and works for many clients often fits the contractor tests. A banquet server, bartender or festival crew member who works shifts set by someone else, follows a captain's or supervisor's direction, wears the client's uniform and has no chance of profit or loss usually looks like an employee.For a staffing agency, supplying servers and bartenders is its usual line of business, which is why prong B of California's test is hard to meet and why agencies typically put event staff on W-2 payroll. For pay, taxes and rights side by side, see W-2 vs 1099 for event staff.
Independent contractor vs. W-2 employee
| Independent contractor (1099) | W-2 employee | |
|---|---|---|
| Who controls the work | The worker decides how, when and where; the client sets the result | The employer directs what, how and when |
| Pay reporting | Form 1099-NEC ($2,000+ for 2026 payments) | Form W-2, any amount |
| Tax withholding | None; the worker pays income tax and 15.3% self-employment tax | Employer withholds income tax and splits Social Security and Medicare (7.65% each) |
| Minimum wage and overtime | Not covered by the FLSA | Covered by the FLSA and state wage law |
| Workers' comp and unemployment | Not covered through the client | Covered under state programs |
| Benefits | None from the client | Eligible for employer plans and legally required benefits such as paid sick leave in many states |
| Tools and expenses | Worker supplies them and deducts the cost | Employer supplies them or reimburses, as state law requires |
| Schedule | Worker accepts or turns down jobs | Employer sets shifts and call times |
What are the penalties for misclassification?
Treating an employee as a contractor can mean back pay for missed minimum wage and overtime under the FLSA, plus unpaid federal employment taxes, penalties and interest from the IRS. State agencies can add their own assessments for unemployment insurance and workers' compensation.
In California, willful misclassification carries civil penalties of $5,000 to $25,000 per violation under Labor Code section 226.8, and the EDD can separately assess penalties of 15% of the tax shortfall in some cases (DIR guidance).
Independent contractor FAQ
Best practices
Collect a W-9 before the first payment A valid taxpayer ID on file avoids backup withholding and makes January 1099 filing straightforward.
Put the scope in writing A contract that defines the result, the fee and who supplies what helps, but how the work runs day to day still decides the status.
Set aside money for taxes Contractors who save a share of each payment for income and self-employment tax avoid a large bill in April.
Check your state's test California, and several other states, use stricter tests than the IRS for wage, unemployment and workers' comp purposes.
Common mistakes
Calling it a "1099 employee" Legally, a worker is either an employee or a contractor. "1099 employee" is a common shorthand, not a separate category.
Trusting the contract label Calling someone a contractor in a contract does not make them one if the business controls their schedule, methods and pay.
Scheduling 1099 workers like staff Set shifts, hourly pay, required training and supervision on site all point toward employee status.
Using the old $600 threshold for 2026 Payments made in 2026 need a 1099-NEC from $2,000; filings for 2025 payments still used $600.
Skipping California EDD reporting California businesses that file 1099s for contractors also have a separate EDD reporting duty.
