Resource · Worker Classification
W-2 vs 1099: How to classify your caregiver
Misclassifying a household employee as an independent contractor is one of the most costly mistakes a family can make. The IRS and DOL have strict rules — here's how to get it right.
The basic rule
W-2 Employee
You control what work is done, how it's done, and when. You provide tools and set the schedule.
You must withhold FICA, pay FUTA/SUTA, and file Schedule H + W-2.
1099 Contractor
The worker controls how, when, and where the work is done. They offer services to the general public and use their own tools.
No withholding required. File Form 1099-NEC if you paid $600+ in a year.
Warning: Most nannies, senior caregivers, and housekeepers are W-2 employees, NOT 1099 contractors. Classifying them as contractors when they should be employees can result in back taxes, penalties, and interest — the IRS routinely audits household employers for this.
IRS 3-factor test
The IRS evaluates three categories to determine worker classification:
Behavioral control
Do you have the right to control how the work is done? If you set schedules, provide training, or give detailed instructions, the worker is likely an employee.
Financial control
Does the worker have a business investment, offer services to others, and set their own rates? If not, they are likely an employee.
Relationship type
Is there a written contract? Are benefits provided? Is the relationship ongoing and indefinite? These factors indicate employee status.
Need help classifying?
Callme AI includes a W-2 vs 1099 worksheet in every caregiver onboarding pack, plus our payroll service handles W-2 filing automatically.
View payroll pricingThis information is for general guidance only and does not constitute legal or tax advice. Refer to IRS guidance and DOL FLSA rules for official classification criteria.