1099 or W-2? Get worker classification right before the IRS or Virginia decides for you.

An employee works under the business's right to direct and control the work; the business withholds income tax, pays employer FICA and FUTA and issues Form W-2. An independent contractor runs a separate business, controls how the work is done, bears profit or loss and receives Form 1099-NEC.

A statutory safe harbor that can stop federal employment taxes for workers treated as contractors if the business filed all required 1099s, treated similar workers consistently, and had a reasonable basis such as court precedent, a prior IRS audit or long-standing industry practice.

Under the Voluntary Classification Settlement Program, an eligible business that agrees to treat the workers as employees going forward generally pays 10% of the employment tax liability computed under the reduced rates of section 3509 for the most recent tax year, with no interest or penalties and no employment tax audit of prior years for those workers.

Yes. Since 2020 Virginia presumes a paid worker is an employee unless IRS guidelines show otherwise, lets misclassified workers sue for lost wages and benefits, protects workers who report misclassification, and lets the Department of Taxation impose penalties and debar repeat offenders from public contracts.

No. The DOL applies an economic-reality test for minimum wage and overtime. Its February 2026 proposal would focus on control and opportunity for profit or loss, but a worker can be an employee under one law and not another, so each test must be checked.

Sometimes, for example a clinician with an established practice who sets fees and works for several facilities. But when the agency sets schedules and rates, can discipline or remove the worker, and the work is the agency's core business, courts usually find employment, as in Pediatric Impressions Home Health.