So I found out today, my second day on the job, that I am an independent contractor. My employer could be a lot more organized and forthcoming with this kind of information, but now I know. And I am kind of freaking out. I’ve never been an independent contractor before, and I don’t know how to do this! I need info.
Taxes- I always get the earned income credit, and I always get back what I’ve paid in and then some. Is it necessary for me to pay quarterly, or what? And how does one do that? I do not make enough to go out and hire a CPA or anything like that, so I have to figure this out myself. Also, I guess I can deduct my uniforms, mileage, etc?
Benefits- I was told at my interview that after three months, I would get a raise, and benefits. Now I’m thinking that’s not true. ICs don’t get benefits, right?
You are probably the first fired if the company wants to save money or be more flexible. As a contractor, you will have fewer legal protections (hence the fact that companies love them), and it will be easier to fire you or cut your hours over a direct hire employee.
Also, you probably won’t get benefits. Are you contracted through a company that offers benefits? I don’t think most do.
You also probably won’t be invited to any company outings or get any company benefits.
You probably are not, actually, an independent contractor. Your employer is just trying to get around the laws that regulate what their rights and responsibilities are for employees (mostly, IME, payroll taxes and worker’s comp insurance).
Basically, in order to be an independent contractor, your employer cannot direct your work (including telling you when you can and can’t do your job), cannot supply the needed equipment for the job (you need to provide that yourself), and a few other things I can’t remember right now.
I’d say 95% of all “Independent Contractors” aren’t, and I’m willing to bet that you aren’t, either. You might want to take the printout of the IRS pages to your employer and let them know you’re concerned about the issue.
Mislabeling of people as temps or contractors to avoid paying benefits, making people easier to fire or offering lower wages is everywhere in this economy. But what can people do about it? Do you think asking HR to not misclassify you will do anything other than get you fired?
Yeah, they do tell me when to work and how to work, and they supply everything I need, such as office supplies, computer, phone, etc. Eek, now I’m really confused. I’m not likely to confront them about it, though- that would just make me look like a troublemaker and a “bad fit”, and I’d like to keep this job for at least a little while.
The guy that interviewed me and told me I’d get benefits after 3 months is just a corporate drone out here from L.A. and didn’t seem to know very much about my job’s details, so I’m pretty sure he was just talking out of his ass about the benefits.
As you will. But something to remember - at least per California law (can’t verify for AZ, though I imagine it’s similar), if you do wind up gods forbid getting hurt on the job, don’t let them tell you that you aren’t covered because you’re “an independent contractor”, even if you signed something to that effect.
What is relevant isn’t whether either you or they think you’re an IC, it’s about whether you actually are one or not. In other words, he can swear up and down that you’re not a duck, and you can sign something that says you’re a cat, but what matters is whether you quack and lay eggs.
Cite: My experience as a Worker’s Comp claims adjuster, dealing on a daily basis with employers who thought that they were absolved of their responsibilities just because they labled someone an IC.
There are a couple of things you need to keep in mind.
Payroll taxes. did they have you fill out a W-4 (withholding)? Look at your pay check stub closely. Are they taking taxes out? You probably won’t make enough to sweat quarterly payments (I’m not a CPA and my contracting years were quite a while ago, so check) but in any event you need to be aware of your withholding or lack there of to prevent a surprise at next tax time
Workman’s comp. Based on what you have posted, I highly doubt that their claim of your are an IC would hold water. So if you are ever injured at work, as an employee you would be eligible for WC. As an IC you would not.
Also read the link above from Maggie and also read this one, and the associated links.
Oh no, yesterday they faxed me a W-9 form, a request for a taxpayer id #, for me. Someone told me what it was, and I emailed them back with, “Oops, wrong form. This is for an independent contractor.” Today I was informed that no, that’s the right form, I’m an independent contractor. No other IRS forms were filled out.
My job isn’t physically risky, but I know that you can slip and fall, get robbed, or any number of things at work. So it’s a concern. Now a few dopers will come in and advise me to hire an attorney to advise me on this- no, I won’t be doing that.
Nah, no need for that. Just something to keep in mind should you need it - and if the situation does arise, WC attorneys work on a contingency system - they take 15% of whatever settlement you get, but you don’t pay them unless/until you get a settlement.*
It’s also something to keep in mind should things go badly with your employer at the end of things - a letter/email to your state tax board letting them know they’ve been failing to pay payroll taxes (another obligation they have for employees but not IC’s), and/or to their WC carrier or the WC system could get them in serious hot water.
*Again, my experience is in CA, YMMV, IANAL, etc.
I know you don’t want to hire a lawyer, but I really think you should carefully consider your situation. Your employer is acting illegally in order to save money, and the fact that you only found out when on the job is a huge red flag. If they are willing to do so, what makes you think they won’t screw you in some other way?
I know times are tough, but what they’re doing is not OK. Perhaps they just don’t know what they are doing and you are actually temp-to-perm, but you’re opening yourself to a lot of liability, and the company is ducking paying the government.
You can submit a form to the IRS to question your status:
I think there is much deception on the part of the employer.
Look,** Alice**, I know you don’t want to hire an expert, and you say you don’t have the money for a CPA, but YOU MUST TALK TO AN ACCOUNTANT at the very least. You MUST. Otherwise you could find yourself with a huge tax bills, possibility including penalties, and Og help you if you are audited! If you ARE an IC you need to carefully track income and expenses and document everything. You will have to pay self-employment tax.
This isn’t a matter where if he gets caught doing the wrong thing he gets punished - this is a matter where if either of you does the wrong thing you could both be punished.
I understand the need for a job and money, but this could cost you more in the end than you’re earning.
Now, excuse, I need to go back to proofreading my tax forms I just received from my accountant to day to make sure neither of us goofed. This year it’s “only” about 30 pages. And I earned under $10k last year for my business.
MtO is right on the technical question regarding IC status (namely, that IC status requires actually being—and not merely being designated—an independent contractor). And a lot of fly-by-night employers do this to avoid some the obligations associated with hiring employees. And given the quasi-legal status of your new industry, I would take this a big, bright red flag.
Like I said, I see this a lot, and while it can be a case of obliviousness on their part, or a mostly-ethical small business trying to minimize expenses, it can also be a huge red flag that your employer is willing to play fast and loose with legalities and with their employees’ welfare.
It seems to me that a Medical MJ prescribing service would want to be absolutely by-the-book in every way they can, because they know they’re going to have a lot of people who want to shut them down. To me, this is another flag that they fall into the last category above.
You’ve got several options:
Turn down the job. This may or may not be finanically feasible for you.
Take the job, but approach them with your research (what we’ve done so far) showing that you are not, actually, an IC and tell them that you’re concerned because you don’t want the company to get in trouble. This may be a longer route of doing 1), or it may cause them to grumble and then straighten up and fly right.
Take the job, don’t say anything, and document the hell out of the situation so that you have protections later.
Take the job, don’t say anything, and pray it all works out for you.
Which one you choose is up to you - I’d strongly recommend course 2) and definitely not 4), but it’s your call based on how badly you need the job, whether they seem generally trustworthy in other respects, etc.
This can make a major difference in your taxes. In effect, you may find yourself having worked for much less pay than you expected. The fact that you weren’t told that this was the plan up front is a major red flag. I’m not sure that documenting the situation will help you on the tax front when you have signed the relevant forms to designate yourself this way.
THanks for that link, if I ever need workers comp that can help me. Are there forms or avenues of complaint for people who feel they are being mislabeled so the company can avoid offering benefits?
I am a contractor/temp through an agency, and when I was let go I was given UI. Does it matter if you are truly an independent contractor vs. a contractor/temp through an agency? I only pay half my medicare and SS taxes (1.45% and 6.2%, I assume the agency pays the other half), and I collected UI when I was laid off due to cuts.
Generally, if you’re working through a temp agency, the agency is your actual employer. It varies, though - the line between “temp agency” and “headhunter” can be blurry. If you got UI, though, and you’re getting deductions taken out, it sounds like you’re employed by the temp company.
Which name is on your paychecks, the agency or the place you’re working at?
Real independent contractor speaking here. I’m self-employed; have multiple clients; provide my own equipment, training, bennies, insurance, retirement, janitorial . . . ; can pick and choose clients and projects and when and how I do the work . . . and I pay the employer’s share of SS/FICA because I am the employer.
For these reasons, ICs are usually paid hourly rates that are much higher (think at least double) than what a similar regular employee would get . . . because the client recognizes that we provide all of those things ourselves. If your pay rate is the same as your employee coworkers, you’re getting majorly shafted.
Listen to Maggie. She speaks truth. The red flags are waving like mad.
