Employee or Independent Contractor?

Treasury Inspector General for Tax Administration (TIGTA) stated in a new audit that “misclassification of employees as independent contractors is a nationwide issue affecting millions of workers that continues to grow and contribute to the tax gap.” Treating a worker as an independent contractor typically saves money for both the employer and the worker. The employer avoids payroll taxes, including FICA taxes of up to 15%, and the worker is able to claim more tax deductions as an independent contractor than an employee.

Computer Programmer was Independent Contractor

Court of appeals determined that a computer programmer was an independent contractor and not an employee. Decision based upon control over the details of work, duration of projects only six to twelve months each, accounting and tax reporting by both parties (1099-MISC form and Form 1040 Schedule C / Sole Proprietorship), beliefs of the parties regarding the relationship, “distinct occupation or business” factor, the “kind of occupation” factor, and the “skill required” factor. Suskovich v. Anthem Health Plans of Virginia, Inc., (CA 7 1/22/2009).

Employee vs. Independent Contractor: 1099-MISC or W-2?

Court case Peno Trucking: Appeals Court found that contracts that say workers aren’t employees can be disregarded in determining whether they are independent contractors. Instead, it is the degree of control that a company exerts over workers that determines whether they are employees or independent contractors. However, some exceptions may allow a company to still treat workers as independent contractors and avoid IRS penalties and back taxes.