Independent Contractor vs Employee in 2026: The IRS 20-Factor Test Explained

The article explains how the IRS classifies workers using three main tests: behavioral control, financial control, and the type of relationship.

It also notes that state laws and Department of Labor rules can add stricter standards or override parts of federal guidance.

Misclassification can lead to back taxes, penalties, interest, audits, and lost benefits or legal protections.

Enforcement has increased since 2023, so companies face higher compliance risk when using independent contractors.