Employee vs. Independent Contractor:
Employee: Business controls what and how tasks are done.
Independent Contractor: Offers services independently, with their own trade, business, or profession.
Key Differences:
Behavioral Control: Does the business control how and what the worker does?
Financial Control: Does the business manage the financial aspects of the worker's job (e.g., payment, expenses, tools)?
Relationship: Are there contracts or benefits like insurance, pension plans, or vacation pay? Is the work ongoing and essential to the business?
Consequences of Misclassification:
Misclassified employees miss out on tax withholdings and employer-paid taxes.
Businesses can be liable for back taxes if workers are misclassified.
To correct misclassification, workers can get an IRS determination and use Form 8919 to report unpaid Social Security and Medicare taxes.
The image below is from DOL.gov
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