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Q&A: Can the same person be both an employee and an independent contractor?

Question:

Can the same person be both an employee and an independent contractor?

Answer from Monica, SPHR, SHRM-CP:

According to IRS guidelines, it is possible to have a W-2 employee who also performs work as a 1099 independent contractor so long as the individual is performing completely different duties that would qualify them as an independent contractor.

Some legitimate examples that we have seen in this circumstance are:

  • A Receptionist also owns a cleaning service business with their spouse. The company contracts with the team to perform janitorial services after hours for the office.
  • A Sales Manager also performs graphic design work for several local businesses after hours. The company contracts with the individual to create a new logo for the company.
  • A Maintenance Technician also owns a fabricating business of their own. The company contracts with the individual to fabricate equipment for the company.

An employee owning their own business is not a requirement, but rather one of the factors to consider when determining if someone may be properly classified as an independent contractor. If you feel confident in the IRS criteria, on the whole, you may classify their separate work as independent contractor work. But, be sure! It is widely believed among tax professionals that having a worker receive both a W-2 and 1099 increases the likelihood of an IRS audit.

If you’d like to learn more about the IRS test for independent contractor classification, you can watch our 2-Minute HR Training on the topic or check out the Independent Contractor Classification Guide on the HR Support Center.

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Monica has held roles as an HR Generalist and Payroll and Benefits Manager at a large ski resort, providing HR guidance to more than 500 employees. She also has HR experience in the healthcare field and the non-profit world. Monica holds a Bachelor of Science degree from Linfield College.

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