If you hire workers with ITINs (Individual Taxpayer Identification Numbers), one question comes up constantly:
Should they be paid as 1099 contractors or W-2 employees?
This isn't just a paperwork decision. It's a major compliance issue.
Let's break this down.
An ITIN is a tax identification number issued by the IRS. Nothing more.
It is not a worker classification.
You can have:
The number itself does not determine 1099 or W-2 status.
The working relationship does.
The Department of Labor and IRS look at control and economic dependence — not what you call the worker.
If you:
They are very likely a W-2 employee.
Calling them a 1099 contractor does not make it true.
Here's what we see constantly:
A payroll company refuses to process ITIN workers as W-2 employees. The business owner is told, "Just pay them 1099."
That advice creates real exposure.
Many business owners think:
But just because it's easier doesn't mean it's right.
When a worker is misclassified, agencies assume wages were handled incorrectly.
That triggers:
And it often starts with one complaint.
The DOL does not care whether your payroll company refused to add ITIN workers correctly. They look at the employer.
Construction is one of the most audited industries for misclassification.
Common red flags:
Those are classic employee indicators.
The Department of Labor has repeatedly identified construction as a priority enforcement area. If your workers look and function like employees, labeling them 1099 will not hold up.
This is not theoretical.
Misclassification cases result in:
Once an audit starts, agencies often expand their review to multiple years.
Many contractors assume 1099 is standard practice for ITIN workers.
It's not.
What's common in the industry is not the same as what is compliant.
Large payroll companies often refuse to process ITIN workers as W-2 employees because it requires additional administrative work. So employers get pushed toward 1099 — not because it's correct, but because it's easier for the payroll provider.
That's a dangerous shortcut.
If the worker functions as an employee, they should be a W-2 employee.
That means:
Yes, it requires a payroll provider that understands the process. Yes, it requires structured documentation.
But it dramatically reduces your exposure.
Wage and hour enforcement has increased in construction and service industries. Agencies share data across departments.
This is not about fear. It's about protecting your business.
ITIN does not equal 1099.
Classification is based on:
If you're unsure whether your workers are classified correctly, you're not alone. We review situations like this every week.
Getting it right now is far less expensive than defending it later.
Want to know what compliant payroll support looks like — including adding ITIN workers properly as W-2 employees?
Use our instant price calculator to see what it costs to work with Baron Payroll. It may be simpler than you think — and far safer than staying where you are.
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