Classifying a worker as a W-2 Employee vs. a 1099 Contractor has significant tax and other consequences on both the worker and the business/organization. However, the consequences should not drive the classification determination. Instead the classification should be based on the facts and circumstances of the engagement with a particular focus on a) degree of control, and b) independence of work. When considering this important determination it would be good to review this article at IRS.gov, giving special attention to the three categories under the heading Common Law Rules.
Another good rule of thumb to consider is if the worker has multiple customers/clients or not. For example, if someone provides bookkeeping services for only one business, she should more than likely be classified as an employee of that business. If instead she provides services to multiple clients, it may be more appropriate to classify her as an independent contractor. In the case that she is a contractor rather than an employee she will then need to determine if she is operating a business or if she has hobby income.