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Are you an independent worker or an employee?

When you perform a job for a business, you can either be paid as an employee or as an independent contractor. As an employee, your employer has an obligation to pay for your taxes, provide certain benefits and offer workplace rights, such as minimum wage and rest breaks. When you are an independent contractor, you are considered self-employed and do not get those benefits accorded to an employee.

So which one are you?

The problem with misclassification

Sometimes employers misclassify workers as independent contractors instead of employees to save money on taxes and benefits. If you are doing the work of an employee, this may be illegal. Unfortunately, there is not a checklist which determines a worker's classification. Instead, the IRS looks at three factors:

  • The type of relationship you have with the company: For instance, are there written contracts or benefits? What about other employees who are doing a job similar to yours?
  • Payment and expenses: How are you paid? What expenses are reimbursed? Who provides the tools and supplies for you to do your job?
  • Control over your work: What type of control does the company have over your work and how you do the job?

The whole relationship must be considered. A contract alone does not make you an independent contractor. The more control an employer has, the more likely it is that you are an employee.

Steps to take if you believe you have been misclassified

When you are misclassified as an independent contractor, you are responsible for your own Social Security and Medicare taxes. As an employee, your employer would be responsible for half of the amount. It can be quite expensive to pay your own taxes. What can you do if you suspect a problem?

  • Talk to your employer about your classification. Get an explanation from them, in writing, if possible, as to why you are being classified as an independent contractor and not an employee.
  • If that does not work, you can get the IRS involved. You can file Form SS-8, which asks the IRS to determine your worker status. There is no fee to file this form, but it can take up to six months to get a response.
  • When filing your taxes, you can use Form 8919 to report your share of Social Security and Medicare taxes due to the IRS. Your employer may be held liable for its share of the taxes by the IRS.

If you are injured on the job or laid off by the company, and you are misclassified as a contractor, you may have to take additional steps to get workers' compensa tion or unemployment benefits.

You may want to speak with an experienced employment law attorney for advice about your situation. In general, the initial consultation is free and confidential.

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