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There is ongoing policy debate about employee classification; that is, who the law says should be classified as an employee and who should be classified as self-employed. But do workers themselves understand their current status? To explore whether workers understand their current status, a recent Abt Associates survey asked 8,503 workers for their (1) work status (employee or self-employed) and (2) what earnings documentation for tax purposes they received from their main job (W-2 or 1099-MISC). Earnings documentation alone is not definitive as to classification. Nevertheless, it is noteworthy that many workers reported a status different than what would be expected from the documentation reported. The brief provides details of that mismatch suggesting that some workers themselves lack clarity regarding their current status. Under the Internal Revenue Code, employees should receive a W-2 from their employer reporting earnings, and independent contractors (self-employed) should receive 1099-MISC forms reporting payments from entities with which they did trade or do business.

Key Takeaways

• For workers who self-report as employees, two-thirds (66 percent) give the expected answer; that is, they received only a W-2. Another 21 percent, however, report receiving only a 1099-MISC, or both a W-2 and a 1099-MISC. The balance of workers refuse to answer or report that they do not know.
• For workers who self-report as self-employed, the largest group give the expected answer: 32 percent of these workers received only a 1099-MISC. Somewhat smaller is the 24 percent of workers who report receiving neither a W-2 nor a 1099-MISC— which is consistent with some forms of self-employment (e.g., a barber or a residential plumber), where payments are personal rather than from a business.

Citation

Klerman, J.A., Daley, K., Dunton, L. (2016). Abt Associates. Understanding Self-Reported Self-Employment Status. U.S. Department of Labor, Chief Evaluation Office.

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The Department of Labor’s (DOL) Chief Evaluation Office (CEO) sponsors independent evaluations and research, primarily conducted by external, third-party contractors in accordance with the Department of Labor Evaluation Policy and CEO’s research development process.