Nail workers - employee or independent contractor

Many nail workers in the US receive a 1099 at the end of the year instead of a W-2. The owner hands over that form and says you are an "independent contractor", meaning your taxes are your own problem.

Here is what matters: that form does not decide who you are. The IRS classifies workers by how the work actually happens, not by the form an employer chooses to issue.

If you genuinely work as an employee but are treated as an independent contractor, that is called misclassification. It costs you money in tax and it costs you protections.

The three groups of questions the IRS uses#

The IRS has no scoring checklist. It weighs the entire working relationship across three groups.

1. Behavioral control#

The IRS asks it this way: "Does the company control or have the right to control what the worker does and how the worker does his or her job?"

Ask yourself:

• Who decides the hours you are at the salon?
• Who assigns customers to you, you or the owner?
• Does the owner tell you which method to use, or which products?
• Are you trained to do the work the owner's way?

A real independent contractor decides most of that alone. Someone who is scheduled, assigned customers and held to the salon's process looks more like an employee.

2. Financial control#

The IRS looks at who controls the business side of the work: how you are paid, whether expenses are reimbursed, and who supplies the tools.

• Do you buy your own powder, polish, lamps and tools, or does the salon supply them?
• Can you lose money on a week of work?
• Do you have your own customers outside this salon?
• Are you paid by the hour, by the week, or by the job?

Someone who invests their own money, can take a loss and serves several customers of their own looks like a contractor. Someone using the salon's supplies and paid on a regular cycle looks like an employee.

3. Type of relationship#

This group covers written contracts, benefits such as insurance or paid leave, how long the relationship lasts, and whether your work is a central activity of the business.

That last point matters in this trade. Doing nails is the central activity of a nail salon. It is a factor that leans toward employee.

What being classified wrongly costs you#

When you are treated as an independent contractor but are really an employee:

• You pay double the retirement tax. For an employee, the employer pays half of Social Security and Medicare. As an independent contractor you pay both halves.
• You usually lose overtime pay. See pay and overtime.
• You may lose workers' compensation cover. See getting hurt at work.
• You are usually shut out of unemployment benefits when the salon closes or cuts back.

On the employer's side, the IRS is explicit: "If you classify an employee as an independent contractor and you have no reasonable basis for doing so, then you may be held liable for employment taxes for that worker."

Two forms you can use#

Form SS-8: ask the IRS to decide#

Form SS-8 asks the IRS to review your situation and determine whether you are an employee or an independent contractor. Either the worker or the business can file it.

The IRS says a response typically takes about six months, so plan around that wait.

Form 8919: report the tax that was never withheld#

Form 8919 is for workers who believe they were improperly classified as independent contractors. You use it to report the uncollected Social Security and Medicare tax on your pay.

In plain terms, it is how you file as an employee instead of carrying both halves as a contractor.

This also varies by state#

The three groups above are the federal tax rules the IRS uses. Many states apply their own test, and some are stricter than the IRS about who counts as an independent contractor.

That means you can be an independent contractor for federal tax purposes and still be an employee under your state's labor law. At that point, ask the labor agency in the state where you work.