In 2025, the distinction between W-2 employees and 1099 independent contractors is more important than ever. Misclassification can lead to serious consequences, including a 1099 audit, fines, and legal issues. This discussion explores how to properly classify workers under updated guidelines, what factors determine independent contractor status, and how businesses and freelancers can protect themselves. Whether you're an employer or a contractor, understanding these rules is essential to staying compliant and avoiding costly mistakes in today’s evolving work landscape.