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Why Employee vs. Independent Contactor Classification Matters

What's in a Name? The Risks and Rewards of Independent S Employee Contractor Job Classification What's the difference between an Independent Contractor (IC) and an Employee? * The information provided is not legal advice; please consult an attorney for guidance on employment laws. Independent Contractor Employee Self Employer Company Long-term, integral part of business Per-project Duration Multiple companies or individuals Source of Income 2$ Primarily one company Tools & Resources Their own Company provides Does not receive Training Company provides Does not receive supervision or work hours and requirements Adheres to company Supervision & Requirements policies and requirements Self-promotion Marketing Company is responsible Signed W-9 required IRS IRS Forms Signed W-2 required Hourly or on salary, company withholds taxes Per-project Compensation 24 Self, including filing tax return Tax 9 Responsibility Not responsible for filing a business tax return Not eligible Benefits Eligible What to Know About Job Misclassification Employer Worker Employers may misclassify workers because: Workers may take a misclassified job because: • They may think classifying a full-time employee as a contractor saves them time and eliminates the need to give them benefits and pay employer taxes. They need a job and like the role and company. • They don't realize it is misclassified. Risks of Improper Job Classification You could be deprived of fair compensation and benefits. How? You could get into IRS trouble. How? 1. An IC with a job that is misclassified could make an anonymous report to the IRS. 1. If you are an employee based on legal criteria and your employer classifies you as an IC, you won't be entitled to any company benefits (health insurance, paid days off, 401k, etc.). 2. You will you not be entitled to overtime pay if you work more than 40 hours a week. 3. Even though you may be sitting next to one of their employees with the same responsibilities, you will be treated differently. 4. You will be responsible for paying all your taxes - the money an employer normally withholds from your paycheck and may owe a large tax bill. 5. The company could think they found a way to save money, at your expense. 2. You must report paying an IC more than $600 in a calendar year, via a 1099 form for the IRS, thus triggering their attention, which could result in an audit with financial penalty or worse. Protect Yourself at Work 1. Work with a staffing firm so workers become employees of the staffing firm, thus freeing the business from possible IRS audit for misclassification. 1. Be aware of the IRS rules so your company doesn't think they found a way to save money, at your expense. 2. If you agree to be classified as an IC and you're not, you can make an anonymous report to the IRS, which may make you entitled to compensation for benefits and employer taxes you paid on your own. 2. Consult with an attorney to make sure they are in compliance. STOP 3. Don't take a misclassified job, even if you need one, because the company may be taking advantage of you. 3. Classify your staff correctly to ensure your workers are fairly compensated and committed to a sound company for a promising career. NOTE: You will not get into trouble if the business misclassifies you, but you will suffer financial consequences in terms of missed benefits and having to pay your own employer taxes. Presented by: Wünderland Sources: CB --- - --- CB

Why Employee vs. Independent Contactor Classification Matters

shared by matthewzajechowski on Apr 24
Whether you’re hiring full-time staff or freelancers, you need to know how to classify workers to the satisfaction of the IRS – or possibly pay for it later. Conversely, if you’re offered a job ...


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