Work and pay
You're being paid in cash, or on a 1099 when you feel like an employee
How you are classified as a worker — employee or independent contractor — changes your taxes, your protections, and what you are owed. Being handed a 1099 tax form instead of a W-2 does not by itself make you a contractor.
This matters because misclassification is common and expensive for the worker. This section covers what you lose, how to tell if it is wrong, and what to do about it. All of it is free.
Being paid on a 1099 does not make you an independent contractor. If the employer sets your hours, directs how you work, and provides the tools, you may legally be an employee no matter what the paperwork says — and misclassification is one of the most common issues the Wage and Hour Division investigates.
Source: U.S. Department of Labor, Wage and Hour Division; IRS worker classification guidance.
What you lose being paid off the books
No Social Security or Medicare credits, which means less later and no disability coverage if something happens to you now.
No unemployment eligibility. If the work stops, there is nothing to claim.
No workers' compensation. Get hurt on the job and the medical bills are yours.
No verifiable income, which means no apartment approval, no car loan, no mortgage.
And the tax is still owed. Cash income is taxable income; nobody withheld it, which means you owe it at filing.
A 1099 does not settle whether you're a contractor
This is the part almost nobody knows. Being paid on a 1099 instead of a W-2 does not make you an independent contractor. What matters is the reality of the working relationship, not the paperwork.
If the employer sets your hours, tells you how to do the work, provides the tools, supervises you, and you work only for them, you may legally be an employee regardless of what your tax form says.
Misclassification is one of the most common issues the Department of Labor's Wage and Hour Division investigates.
Misclassified workers can file wage claims exactly like any other employee.
Why employers do it
A contractor costs an employer less. No payroll taxes, no overtime obligation, no unemployment insurance, no workers' comp premium.
That saving comes directly out of what you would otherwise have. It isn't an accident and it isn't always innocent.
What it costs you at tax time
As a contractor you owe self-employment tax, which covers both the employee and employer halves of Social Security and Medicare. That's a meaningful bite nobody warned you about.
You may also owe quarterly estimated payments rather than one annual bill.
The upside, and it is real: you can deduct legitimate business expenses. Mileage, tools, supplies, a portion of your phone. Track them from day one or they don't exist.
If you think you're misclassified
Keep your own records: hours worked, what you were told to do, who supervised you, what equipment you used. Screenshots of schedules and texts count.
You can ask the IRS to determine your status using Form SS-8. It is free and it does not require a lawyer.
You can file a complaint with the Department of Labor's Wage and Hour Division at 1-866-487-9243. It is free, and retaliating against you for filing is illegal.
Your state labor agency may offer stronger protections and a longer window than federal law does.
What you can do
- Ask directly, in writing, whether you're being paid as an employee or a contractor.
- If you're on a 1099, set aside a percentage of every payment for taxes.
- Start a mileage and expense log today if you're a contractor.
- Keep your own record of hours, supervision, and equipment used.
- If the work looks like employment, look up IRS Form SS-8.
- Call the Wage and Hour Division at 1-866-487-9243 with questions. It's free.
Where to check this yourself
dol.gov for worker classification and the Wage and Hour Division. irs.gov for Form SS-8, self-employment tax, and mileage rates. Your state labor agency may offer more.