This is a very common situation. A company may hire a worker to do some work for the company. The worker may be under the impression that he or she is an employee and that the company is withholding taxes. When it’s tax time, the worker may discover that he or she has been classified as an independent contractor, nothing has been withheld, and the worker owes a significant amount of money.
When you get hired at a job, you may not care what your employment status is. However, you should care, because whether or not you are classified as an independent contractor or an employee makes a big difference in a lot of aspects of the job, not only taxes.
Legally, an independent contractor is a worker who is not considered an employee. Because the worker is not an employee, he or she is not subject to many of the rules to which employees are subject. It may be difficult in some cases to determine whether a worker is an independent contractor or an employee.
There are some tests that the IRS, statutes, and court cases use to determine whether a worker is an independent contractor or an employee. Those tests include whether a worker gets a steady paycheck or is paid for the hours worked only, who sets the work schedule (the employer or the worker), who provides the tools and equipment for the job, whether the work is temporary or permanent, and who controls how the work is done, among other factors. Basically, the more control the employer has over the work and how it is done, the more likely the worker is to be an employee rather than an independent contractor.
Besides taxes, there are other reasons why the worker’s employment classification is important. Employees may get unemployment compensation if they are laid off while independent contractors do not. Employees may be entitled to benefits and independent contractors are not. Independent contractors are not entitled to overtime or workers’ compensation.
Employers often wish to classify workers as independent contractors instead of employees. However, this is illegal if a worker is actually an employee. If you believe your employer mischaracterized you as an independent contractor instead of an employee, call Los Angeles employment law attorney Conal Doyle at 310-385-0567. He can help. Call today to learn more or to schedule a free consultation on your case.