Should i be an employee or independent contractor

An independent contractor must pay the higher self-employment tax. As this scientist’s income increases, he will face a. To decide what type of position is best for your talents and schedule, it’s essential to understand the difference between an employee and an independent contractor. In this article, we will discuss the main differences between employees and independent contractors to help you during your job search.

For payroll employees, the answer is “ yes. For independent contractors, the answer is “no” unless otherwise spelled out in the independent contractor agreement.

In other words, you will get in trouble and pay the government (and maybe even the individual employee in question) lots of money. For this reason, the IRS and Department of Labor pay close attention to worker classification issues to ensure that employers are making the right determinations. Becoming an employee for a company, hospital or group can make things a lot easier. Generally speaking, if you don’t want to deal with the financial side or have to worry about finding your own insurance, employment makes more sense. Does your employer claim you are an independent contractor?

What constitutes an employee and independent contractor? Is a contractor considered an at will employee? Can I classify a worker as an independent contractor?

See full list on irs. Facts that provide evidence of the degree of control and independence fall into three categories: 1. Behavioral: Does the company control or have the right to control what the worker does and how the worker does his or her job? Financial: Are the business aspects of the worker’s job controlled by the payer? Type of Relationship: Are there written contracts or employee type benefits (i.e. pension plan, insurance, vacation pay, etc.)? Will the relationship continue and is the work performed a key aspect of the business?

Businesses must weigh all these factors when determining whether a worker is an employee or independent contractor. Some factors may indicate that the worker is an employee, while other factors indicate that the worker is an independent contractor. There is no “magic” or set number of factors that “makes” the worker an employee or an independent cont.

The form may be filed by either the business or the worker. The IRS will review the facts and circumstances and officially determine the worker’s status. Be aware that it can take at least six months to get a determination, but a business that continually hires the same types of workers to perform particular services may want to consider filing the Form SS-8(PDF). Once a determination is made (whether by the business or by the IRS), the next step is filing the appropriate forms and paying the associated taxes. Forms and associated taxes for independent contractors 2. There are specific employment tax guidelines that must be followed for certain industries.

If you classify an employee as an independent contractor and you have no reasonable basis for doing so, you may be held liable for employment taxes for that worker (the relief provisions, discussed below, will not apply). Employment Tax Guidelines: Classifying Certain Van Operators in the Moving Industry(PDF) 2. If you have a reasonable basis for not treating a worker as an employee , you may be relieved from having to pay employment taxes for that worker.

To get this relief, you must file all required federal information returns on a basis consistent with your treatment of the worker. Your situation does sounds problematic. I encourage you to read the following from the IRS.

If they tell you that you should. You are correct in that you will be an employee. They are just trying to beat paying taxes. Often, independent contractors and employees work side by side at the same company, even doing the same or similar work. Courts in New York have found that no single factor or group of factors will conclusively define whether a worker should be classified as an employee or independent contractor ” Sodomsky, supra at 28 citing Tracy A. Cullen, What a Tangled Web We Weave: The Independent Contractor Snarl, N. Instant Downloa Mail Paper Copy or Hard Copy Delivery, Start and Order Now!

Classifying a worker as an employee or an independent contractor has a significant effect on the cost of employing that individual. An employee is generally guaranteed a regular wage amount for an hourly, weekly, or other period of time even when supplemented by a commission. However, independent contractors are most often paid for the job by a flat fee. The correct worker categorization has a profound impact on businesses because it affects not only how workers are pai but how the government gets paid. Because of the latter reason, this is an issue that will not be going away any time soon.

Simply put, a business cannot exercise much control over an independent contractor, and utilizing a contractor in situations where such a degree of control over the time, means, and supervision of the work may lead to a situation where you need to exercise control, but can’t. It is the facts and circumstances of the work relationship that determine whether a worker is an employee or an independent contractor. Generally speaking, the more control the business has over the worker, the more likely it is that the worker is an employee rather than an independent contractor.

IRS Publication 15-A has more details. Department of Labor offered guidance this week on how it interprets the tests to determine whether a worker should be classified as an employee or independent contractor. But it’s important to get it right, because when you misclassify an employee as an independent contractor , you open the door to significant legal and financial troubles.