Independant Contractor vs. Employee

[Dazzed and Confused]

My question involves independent contractors in the state of: Florida

I have been offered a new job and have the option of being a regular employee OR an independant contractor and wondering which would be best.

Any input would be most appreciated.

[flyingron]

You first have to understand what is legal. It's not just an employer or employee option as to the whether you are an independent contractor or employee. The IRS holds a number of characteristics to determine if your situation merits one classification or the other. If you act like an employee, you are an employee.

Generally, contractors are responsible for their own time, tools, etc...they get paid a fee and are entirely responsible for their own taxes. They make estimated tax payments and are responsible for paying the entire self employment (SSN/Medicare) tax. An advantage is that you can directly deduct expenses off the top of your income for reasonable and necessary expenses.

Employees work at the discretion of their employers. Employers take withholding for taxes out and the employer pays a portion of the SS/Medicare out of their funds.

[Bubba Jimmy]

As an employee you would be covered under the unemployment benefits laws of Florida and if you were hurt on the job you would be entitled to worker's compensation. Self-employed independent contractors do not have those beneifts. Make sure you are paid at least 12-15% more as an independent contractor to cover the extra 7.65% in social security and medicare taxes, and to obtain the insurance protections you'd have as an employee (i.e. the worker's comp and unemployment).

[PattyPA]

http://www.irs.gov/pub/irs-pdf/p1779.pdf

[Dazzed and Confused]

Thank you all for the excellent info. Would anyone know if there is a requirement that I become a legal entity such as an S-Corp or do I just call myself an Independant Contractor and file my taxes as a one without doing anything special? Thinking about when I'm paid my fee - should it be paid to my name or is it better to be paid to my legal entity?

[PattyPA]

You do not need to form any type of business entity. The company will ask you for a W-9 and that will tell the company to whom to issue the 1099-MISC.

What is best, however, is outside my area of expertise. You need a good accountant to advise you.

[eerelations]

You also need to determine if being an independent contractor is legal in the first place. If it isn't and in spite of that, you agree to be paid as one, and either you or your employer are caught in the future, you'll both be in a lot of financial hot water.