Are you an independent contractor, or a full-time employee?

[IDemo]

This is a repost and update of an OP from over a year ago.

Along with outsourcing, offshoring, and "right-sizing", contracting has become more popular with American business as a cost savings measure. A company can not only avoid paying their share of FICA taxes but skip on the unemployment compensation when a job has been completed. That's not to say there aren't legitimate circumstances when an independent contractor fits the bill, but the system has been abused, predictably.

I spent much of 2014 working for a tech startup company as a "1099 employee", or independent contractor. This, despite having no contract in place. What this means is that you are responsible for paying the full amount due for Social Security and Medicare expenses, including the half that would normally be covered by your employer. You also must make quarterly income tax payments rather than having them due by April of the following year.

Workers who should qualify as full-timers will often find themselves with a 1099-MISC form at the end of the year instead of a W2. But that doesn't mean you are necessarily stuck with that designation. There are tests that the IRS uses to determine how you should be classified, including:

1) Do you receive work assignments directly from the boss, or are you given a project to complete? Note - this one applies even if it is understood that they have the right to issue instructions, whether they actually do or not.

2) Who supplies the tools, workspace and supplies for you to execute the task?

3) Are you expected to work regular hours or can you perform the job on your own time as needed?

4) Are you free to work for other clients or is your time expected to be fully devoted to one employer?

5) Are you paid an hourly wage?

The IRS has a 20 point questionnaire with further tests to determine your status as described here:
http://www.accountingpartners.com/irschecklist.shtml

If you feel you have been unfairly classified as a contractor rather than a full time employee, you can submit a form SS-8, "Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding". The IRS will mail a copy to the employer for them to make their case before making a determination. That won't happen overnight, particularly this year with an understaffed IRS.

Yes, you are very likely going to damage your relationship with the outfit that gave you the work. But this is just another means for employers to profit at the expense of the people who do the work that earns their profits.

*********************************************************************

I received a letter recently from the IRS stating "we determined that you are an employee for federal employment tax purposes." No surprise, since my tax preparer had filed my return under the assumption this would be the case. My former employer would now owe his portion of FICA taxes which were uncollected by him. They also included a two page letter detailing their reasons for the determination.

This explains a bit further (the whole page is a good read for those interested):

The ramifications for an employer can vary depending on whether or not the DOL and the IRS determine the misclassification was unintentional or intentional, or even fraudulent.

If the misclassification was unintentional, the employer faces at least the following penalties based on the fact that all payments to misclassified independent contractors have been reclassed as wages:

$50 for each Form W-2 that the employer failed to file because of classifying workers as an independent contractor.

Since the employer failed to withhold income taxes, it faces penalties of 1.5% of the wages, plus 40% of the FICA taxes (social security and Medicare) that were not withheld from the employee and 100% of the matching FICA taxes the employer should have paid. Interest is also accrued on these penalties daily from the date they should have been deposited.

A Failure to Pay Taxes penalty equal to 0.5% of the unpaid tax liability for each month up to 25% of the total tax liability.

If the IRS suspects fraud or intentional misconduct, it can impose additional fines and penalties. For instance, the employer could be subjected to penalties that include 20% of all of the wages paid, plus 100% of the FICA taxes, both the employee's and employer's share. Criminal penalties of up to $1,000 per misclassified worker and 1 year in prison can be imposed as well. In addition, the person responsible for withholding taxes could also be held personally liable for any uncollected tax.

http://blog.justworks.com/consequences-misclassifying-workers-independent-contractors

We've all heard about the so-called "Gig economy" - the increase in businesses relying on contractors rather than full-time employees; 1099 vs. W2, no benefits, no separation pay and no unemployment insurance. Some people are able to command top dollar for their time and do quite well under a contract basis. Lately though, many are finding themselves misclassified as such without seeing the level of pay justifying it. When an employer abuses the system, you don't have to accept that, and the IRS tends to find in favor of the employee.

[egalitegirl]

1. I want a flexible schedule

I think the full time employment arguments are more suited to men. Many women want flexible schedules and whenever someone claims to help workers by passing some law preventing flexible and part-time schedules, they cause immense harm to women.

This is also true with unions. Whenever unions take over a sector, they tend to impose the male mindset as most of the unions are dominated by men. They only think in a linear manner and from their viewpoint and want everyone to work full time even if there are people who seek part time jobs.

[IDemo]

2. This isn't a gender-based issue.

The entire point of the OP is to educate about the differences between the classification of workers by employers as contractors or full-timers. Your work schedule is an unrelated issue between you and your employer.

[brooklynite]

3. I work full-time for an annual salary and a defined payment pension

I'm considered management, and can be fired at will.

I also have a part-time position teaching at a University, for which I'm paid an agreed-upon total per term. For this position I can, but choose not to join a Union.

I am happy with both arrangements.

[rhett o rick]

4. Wow, and you think you are a Democrat?

[brooklynite]

6. Which part offends you? And how many other Democrats have you kicked out with me?

[rhett o rick]

7. Those that believe that continuing the status quo will be safe for themselves and to

heck with those struggling among us. Those that use pragmatism and "incremental change" as excuses to accept that we have 2.5 million children homeless, 16 million living in poverty, 16 million living in low income homes, the highest infant mortality rate of all modern nations. It used to be that the Democratic Party represented the People not the Rich.

[bighart]

9. Holy Shit where did you get any of that from what was posted?

I would be counted in the same category as brooklynite, mid level management employed at will. I saw nothing in that post referencing incremental change or advocating for pragmatism. I believe brooklynite, like me, is concerned for the plight of children living in poverty and homelessness. Being somewhat stably employed, who is ever without fear of losing a job when you can be let go at any moment for any or no reason, and counting oneself in the middle class does not any way mean that person should be counted among the "Rich"

Just my thoughts.

[rhett o rick]

10. The Capitalists have one main objective and that's to amass all the wealth they can.

They will exploit the earth and the labor of those less fortunate. The Capitalists have coopted our government and are proceeding to transfer wealth via tax laws, etc. from the 99% to themselves, the 1%. It's a fact that the wealth gap is widening. This has be be brought to a sudden halt or we will have more and more poverty, more and more joblessness, etc. Those that support the Wealthy 1% and their candidate Hillary Clinton, are ignoring those among us struggling. Sure she has made some gesture as if she is concerned but she has gross integrity issues and we know she is beholden to the Big Money Fat Cats. Why trust her when we have a great choice in Sanders?

[brooklynite]

11. Actually, I work for the Government. I'm a transportation planner.

[rhett o rick]

12. Who do you think should fund the safety nets and help those among us suffering?

The 99% or the 1%?

[brooklynite]

13. I believe in progressive taxation and a strong safety net...so does Hillary Clinton.

[rhett o rick]

14. In your dreams. She believes in taxing the 99% and not the 1%. Her recent

rhetoric is totally for the campaign. And she supported her husband when he escalated the drug war.

“Far from resisting the emergence of the new caste system, Clinton escalated the drug war beyond what conservatives had imagined possible a decade earlier. As the Justice Policy Institute has observed, “the Clinton Administration’s ‘tough on crime’ policies resulted in the largest increases in federal and state prison inmates of any president in American history.”99 Clinton eventually moved beyond crime and capitulated to the conservative racial agenda on welfare. This move, like his “get tough” rhetoric and policies, was part of a grand strategy articulated by the “new Democrats” to appeal to the elusive white swing voters. In so doing, Clinton—more than any other president—created the current racial undercaste. He signed the Personal Responsibility and Work Opportunity Reconciliation Act, which “ended welfare as we know it,” replacing Aid to Families with Dependent Children (AFDC) with a block grant to states called Temporary Assistance to Needy Families (TANF). TANF imposed a five-year lifetime limit on welfare assistance, as well as a permanent, lifetime ban on eligibility for welfare and food stamps for anyone convicted of a felony drug offense—including simple possession of marijuana.”
― Michelle Alexander, The New Jim Crow

And from Black Lives Activist Ashley Williams:

"The 1994 Crime Bill that she so vigorously defended not only expanded incarceration, but stripped funding for college education from prisoners. The Clinton legacy allowed for policies that prevented anyone convicted of a felony drug offense from receiving food stamps or income assistance. Clinton-led welfare reform fundamentally ripped apart the social safety net.”

She is no friend of the 99%.

[brooklynite]

15. Guess I was dreaming when Clinton voted against the Bush Tax cuts...

[rhett o rick]

16. It was a safe vote. I don't trust her. She is tough but lacks integrity.

Her and Bill are aiming at amassing a huge fortune. We need a billboard showing their wealth climbing min by min.

[IDemo]

5. Most jobs management or otherwise are at-will anymore

You sound like you're in good shape with your full-time work and can view your adjunct position as supplementary income. Many adjuncts do not enjoy the same security and unfortunately they have become preferred over tenured professors in most universities.

[alarimer]

8. This needs to be illegal in all but the rarest circumstances.

In fact, I would ban "at will" employment altogether, as well as "right to work".

We are returning to the robber baron era; I especially blame tech companies with their "disruptive" philosophies. It's not disruptive; it merely a return to the days when employers abused employees and treated them like so much meat to be used and thrown out, in the bad old days before regulation put a stop to most of that.

Why do supposedly progressive people like this sort of abuse? It's not a progressive position to approve of the Ubers of the world. It is REgressive and entirely symptomatic of the Democratic Party, refusing to stand up for what they used to stand for (worker's rights, among other things).

I'd like the "gig" economy to die in a fire.

[JCMach1]

17. Currently an exploited college adjunct...

Let's talk about hours and underpay and no benefits.