Are you working as an independent contractor? If so, you may enjoy a certain amount of flexibility. However, the company you work for may be cheating you out of your rightful wages by misclassifying you. Many so-called independent contractors should actually be employees.
But how do you know if you should be an employee instead of an independent contractor? Why does it matter? Find out below.
Tax implications
As an independent contractor, you must cover your Medicare and Social Security taxes, which account for 13.3 percent of your earnings. On the other hand, if you are an employee, you and your employer split these taxes. This means you may be paying more taxes than necessary.
Lack of benefits
According to the U.S. Department of Labor, misclassified workers lose out on many protections and advantages, such as the following:
- Earning the minimum wage
- Earning overtime compensation
- Getting unemployment insurance
- Obtaining medical and family leave
- Taking rest breaks
The people you work for may be deliberately misclassifying you as a contractor so they do not need to provide you with these benefits or protections.
Signs of misclassification
If you get Form 1099 but you think you should get Form W-2, here are some ways you can tell:
- Your boss determines when, where and how you work.
- Your boss purchases tools and equipment and pays you an hourly rate.
- Your work is the driving force behind the entire business.
- You cannot hire subcontractors.
- You are dependent on the business for income.
These are some red flags that you may be a victim of employee misclassification.
What steps to take
If you believe you are losing out on the wages and benefits of being an employee, you can talk to an employment law attorney to determine your next steps. Your lawyer may advise you to speak with your boss, negotiate a new contract, contact the IRS or even file a lawsuit.
