Working for family - Am I an independent contractor/self employed or an employee for tax purposes?

This is a common misclassification issue that happens a lot with small businesses, especially with family members. Based on what you've described, you sound much more like an employee than an independent contractor. The IRS looks at three main categories of control: behavioral (does the company control what you do and how you do it), financial (does the company control business aspects of your job), and relationship (written contracts, benefits, permanency of relationship). Since your brother provides the tools, assigns your tasks, and sets your schedule, you're likely an employee in the eyes of the IRS. Many small business owners incorrectly classify workers as 1099 contractors because it saves them money - they don't have to pay the employer portion of Social Security and Medicare taxes (7.65%) or deal with withholding. If you're misclassified, you'll end up paying self-employment tax (15.3% covering both employer and employee portions of Social Security and Medicare) plus your regular income tax. You'd also need to make quarterly estimated payments.

I went through something similar with my cousin's business last year. After trying to figure out the whole 1099 vs W-2 thing, I found this amazing tool called taxr.ai (https://taxr.ai) that helped clear things up. It analyzed my work situation and gave me a really clear explanation of why I was technically an employee according to IRS rules. The best part was that it showed me exactly what sections of tax code applied to my situation, which gave me the confidence to talk to my cousin about changing my classification. They have this feature where you can upload documents or describe your work arrangement, and it tells you if you're likely misclassified. Saved me a ton in self-employment taxes!

I just wanted to update after checking out taxr.ai that someone mentioned. I was super skeptical at first because my sister kept insisting "that's just how the beauty industry works" with everyone being 1099. The tool analyzed my situation where I work fixed hours at her salon, use her equipment, and follow her business processes. The report clearly showed I was misclassified and explained that "industry standard practice" doesn't override IRS rules. I showed my sister the part about potential penalties for misclassification (which can be pretty severe) and she finally agreed to properly classify me as an employee. It saved me from paying that extra self-employment tax and dealing with quarterly payments. Plus my sister is actually sleeping better knowing she's not risking an IRS audit. Honestly wish I'd known about this sooner!

If your brother doesn't want to reclassify you, you might need to talk to the IRS. I tried for months to resolve a similar issue with a previous employer but they refused to change anything. Getting through to the IRS was IMPOSSIBLE though - I spent hours on hold and kept getting disconnected. Then I found Claimyr (https://claimyr.com) and watched their demo video (https://youtu.be/_kiP6q8DX5c). They got me connected to an actual IRS agent in less than 15 minutes when I had been trying for weeks on my own. The agent walked me through filing Form SS-8 to determine my work status and explained how I could use Form 8919 to report my wages properly. Having an actual conversation with the IRS made the whole process way less intimidating than I expected.

I need to apologize for my skeptical comment earlier. After waiting on hold with the IRS for 2 hours yesterday and getting disconnected AGAIN, I was desperate enough to try Claimyr. It actually worked exactly as described. I got a call back in about 30 minutes telling me they reached an IRS agent, and I was connected immediately. The agent helped me understand that I should file Form SS-8 for my work classification review and explained how to handle the taxes in the meantime. Never been so happy to be wrong about something! I was able to get clear answers about my misclassification situation in one phone call after weeks of frustration. If anyone else is dealing with family members who won't correctly classify you as an employee, definitely worth getting advice directly from the IRS.

There's a lot of focus on the tax implications, but don't overlook the benefits you're missing out on as a misclassified employee. When I was incorrectly classified as a 1099 contractor, I wasn't just paying extra taxes - I was also missing out on: - Unemployment insurance eligibility - Workers' compensation if injured on the job - Protection under wage and hour laws - Potential eligibility for overtime pay - Employment discrimination protections Your brother might not realize all the legal implications beyond just taxes. Even in a family business, these protections matter. I'd have a conversation focusing on both the tax and legal aspects of proper classification.

I'm seeing lots of complex answers here but wanted to add something simple: If you're working regular hours that your brother sets, using his equipment, and following his instructions, you are almost certainly an employee (W-2), not a contractor (1099). Being family doesn't change the tax classification rules. From my experience, your brother is probably trying to save money by not paying employer taxes, but that puts the burden on you and could get him in trouble with the IRS. They take misclassification seriously.

You're absolutely right to be concerned about this classification issue. Based on everything you've described - your brother setting your schedule, providing tools, and assigning tasks - you definitely sound like an employee rather than an independent contractor. The financial impact is significant. As a misclassified 1099 contractor, you'd pay the full 15.3% self-employment tax (Social Security and Medicare) plus regular income tax, whereas as a W-2 employee, your brother would cover half of that Social Security/Medicare burden. Plus you'd avoid the headache of quarterly estimated payments. I'd suggest having an honest conversation with your brother soon. Many small business owners misclassify workers without realizing the rules or consequences. Approach it as wanting to make sure you're both protected - misclassification can result in serious penalties for the business if the IRS ever audits. The IRS Publication 1779 "Independent Contractor or Employee" is a good neutral resource you could share that explains the classification factors clearly. Frame it as "let's make sure we're doing this correctly" rather than "you're doing this wrong." Since you're family, he'll probably want to do right by you once he understands the implications.

I've been through this exact situation with my uncle's construction business. You're absolutely right to be concerned - based on your description (set schedule, provided tools, assigned tasks), you're clearly an employee, not an independent contractor. The tax difference is substantial. As a 1099 contractor, you'd pay 15.3% in self-employment taxes plus your regular income tax. As a W-2 employee, your brother would pay half of that Social Security/Medicare burden (7.65%), and you'd only pay the other half. That's real money, especially when you're working part-time. I had success approaching my uncle by emphasizing that proper classification protects both of us. The IRS can impose significant penalties on businesses for misclassification - sometimes including back taxes, interest, and fines. I framed it as "let's make sure we're following the rules correctly" rather than accusing him of doing anything wrong. The conversation went much better than I expected. Most family business owners don't misclassify workers maliciously - they often just don't understand the rules. Once my uncle realized the potential risks to his business and the extra tax burden on me, he was happy to fix it. Now I get proper W-2s and don't have to deal with quarterly payments or self-employment tax. Don't let the family relationship stop you from protecting yourself financially. A respectful, fact-based conversation should resolve this quickly.

I've been dealing with a very similar situation at my sister's accounting firm. Like you, I was working set hours (9-5 daily), using her office equipment, and following her specific procedures for client work, but she was planning to give me a 1099. After doing some research, I realized this was a clear case of employee misclassification. The IRS uses a three-factor test: behavioral control, financial control, and the type of relationship. In your case (and mine), the employer controls when, where, and how the work is done - that's textbook employee status. The tax impact is real - you'd be paying about 7.65% more in taxes as a 1099 contractor, plus dealing with quarterly estimated payments. That's money you shouldn't have to pay if you're properly classified as an employee. I approached my sister by focusing on protecting both of us from potential IRS issues. Misclassification penalties can be severe for businesses - they could face back taxes, interest, and substantial fines. I shared the IRS guidelines with her and explained that I wanted to make sure we were both doing everything by the book. She was actually grateful I brought it up once she understood the rules and risks. Now I'm properly classified as a W-2 employee, and we both sleep better knowing everything is compliant. Don't let the family relationship stop you from having this important conversation - approach it as wanting to do things correctly rather than pointing out mistakes.