As of 2015, 16 percent of workers in the United States considered themselves to be independent contractors or self-employed rather than employees. 1 Given the tax and other advantages that can arise from not classifying workers as employees, it is likely that a significant proportion of those workers were not correctly categorized according to the applicable legal tests. Indeed, it is likely that many of those workers would be treated as employees if their statuses were formally contested. In a hand-collected data set of worker classification decisions in the tax context from 1927 to 2021, we found that more than half of the cases — 50.7 percent — were resolved in favor of finding workers to be employees. 2
The issues involving worker classification go back decades. Given the rise of the gig economy, these issues have resurfaced with urgency, with Uber and other gig economy service providers making headlines for the past several years for allegedly misclassifying workers. The debate about whether Uber food delivery and ride-share workers are independent contractors (as Uber would have it) has thus far been concentrated in the employment law context. But the federal tax implications of worker classification are equally important. This article examines the worker classification issue in the gig economy in the realm of U.S. federal tax law.
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