We all know worker misclassification comes with a major price tag. But for many, the process to properly classify and defend a worker’s status feels complicated and confusing, if not impossible, kind of like navigating an asteroid field. And in the words of C-3PO, “The possibility of successfully navigating an asteroid field is approximately 3,720 to 1.”

It’s such a challenge that states like California are attempting to clear a path through the storm by streamlining and simplifying the process with things like their new “ABC Test.” This is a way to easily determine if a worker would pass as an independent contractor in the eyes of the IRS (more about that here).

Darth Vader

Job Title:

Evil Leader of the Galactic Empire

Employer

Galactic Empire

Employment classification

Fulltime Employee, W2

Classification Defense:

• Was under complete control and direction of the Emperor, his boss
• Used the Empire’s weapons of destruction to do his evil bidding
• Was compensated by the Empire and used the Empire’s money to compensate others (vowed to compensate Boba Fett for his troubles if Han Solo died in the Carbonite)

Compliance Risk

High
Medium
Low

Current Status

Deceased. Died saving his son, Luke Skywalker in The Return of the Jedi, but lives on as a hologram ghost guiding Luke and the Rebellion.

Han Solo

Job Title

Pilot, Smuggler, General Freedom Fighter for hire

Employer 

Solo Inc., Rebel Alliance

Employment Classification

Depending on the timing in his career:

• Initially formed Solo Inc. to perform smuggling services for some of the most vile characters in the Galaxy, most notably, Jabba the Hut
• Owned his own ship
• Worked for multiple customers
• Definite risk of financial loss (or death)
• Didn’t take orders or direction from anyone
• Hired his own help to perform services (Chewbacca)

W2, Full Time Employee

• Later, became a W2 employee of the Rebel Alliance
• Took direction from the Rebel leaders
• Gained General status and responsible for leading several teams and missions to save the Rebellion
• Initially compensated by the Rebellion for saving Princess Leah (SOW), but later became a full time employee of the Rebellion with full benefits

Compliance Risk

High
Medium 
Low

• Low as a 1099 when operating Solo Inc.

Current Status

Deceased. Died at the hands of his son, Kylo Ren in The Force Awakens.

Boba Fett

Job Title

Intergalactic Bounty Hunter

Employer

Boba Fett, LLC.

Employment Classification

Independent contractor

1099: Boba is an independent contractor, but prefers to perform services for the most vile characters in the Galaxy.

Classification Defense:

• Boba markets himself and his services to multiple customers
• He has the opportunity for profit or loss
• He owns his own equipment to perform his services
• He does not take direction on a day to day business from his customers
• He can perform his services all over the galaxy, not just at the customer site with customer equipment

Compliance Risk

High
Medium 
Low

Current Status

Contrary to what we all learned in Return of the Jedi, Boba Fett is NOT DEAD! Although he fell into the mouth of the Sarlacc, he somehow survived and made an appearance in The Force Awakens. He is presently exploring the Galaxy in his ship Slave I looking for additional work.

Use the Force

Fictional heroes aside, we can all learn a lot about worker classification just by asking the right questions and learning how to apply the logic the IRS uses in their audits. So don’t be intimidated, but do be prepared. Particularly if you’re working with multiple non-permanent employees, make sure you have a healthy tax defense file for each case. Being prepared will help you close the uncertainly gaps and minimize expensive tax risks. As a wise Jedi Master once said, “Fear is the path to the dark side.” So don’t be afraid, and stay in the light. Pull in an expert if you need to. We’re here to help!