So Apparently I'm An Independant Contractor

[elorei]

my boss, the sole owner of this company, has told me i am an independant contractor, so she has to pay less taxes. her CPA has apparently told her this is the best route for her. i asked her what this meant for me, in general, and she said nothing would change, except that i would have to file my taxes differently.

this was a few months ago. before that, she had been withholding from my paychecks. now she no longer withholds.

my wife and i applied for a new home loan, and we were accepted immediately, until i told them about my tax situation. the mortgage officer told us that i am "self - employed" and therefore cannot qualify for the loan. we have basically lost the home we were about to buy because of my new status of being an independant contractor. this made me livid, but it is *MY* fault for not looking into these things before hand.

However, after finding this info out, i looked more in depth at what makes a subcontractor, and what benefits she is gaining by making me one. i wanted to see her actual fiscal savings by labeling me as such, to see if we could come up with something to get me back into a W-2.

After much searching, it appears that what she has done is illegal.

I am a full time employee.
I work in the office set hours every week.
I do not do any work for any other company of any sort.

From what I can tell, i am an "employee", not an "independant contractor".

What legal issues am i getting myself into over this? Am i damning myself by knowingly letting her claim me as such when i know differently? How much more money is the business responsible for if i was an "employee"?

Thanks so much.

[aaron]

You're not getting yourself into trouble as long as you pay your taxes. But you apparenlty haven't done that yet, or you would know that the greatest cost savings to the employer will come at the expense of the employee. That is, your taxes are going to go up, because you have to pay your "self-employment taxes".

If your employer is misclassifying you as an independent contractor, your employer can get into trouble and face tax penalties.

[elorei]

sort of a double post, sorry about that:

how much more in taxes am i looking at? a little more? a LOT more?

do i pay double the fica because my employer isnt matching it?
do i pay unemployment taxes because my employer isnt paying them?

[aaron]

Here's IRS information on self-employment taxes.

[SthrnSqrl]

sort of a double post, sorry about that:

how much more in taxes am i looking at? a little more? a LOT more?

do i pay double the fica because my employer isnt matching it?
do i pay unemployment taxes because my employer isnt paying them?

A Lot more, if it's anything like my situation. I was hired by a company a couple years ago. I was required to work set hours, on their property, and was required to do the job as per their timetable and methods. They originally hired me in at $10/hour, but my paychecks reflected $7.50/hour. I assumed this was due to taxes. Apparently, it was not. They sent me a 1099 at the end of the year.

I was sued by the IRS for about $7500 for the $11k I earned that year. Of that $11k, it cost me about $4k for expenses (fuel to drive one hour to work). They have informed me that if I can prove that I was required to work to the company's timetables and requirements, that I might be able to get it reduced slightly, by getting the employer to pay a small portion of it (around $750) Which still leaves them billing me for over $6000.

Self-Employment taxes are a rip off, but unless you can prove that you were an employee, you are stuck for them. You basicly have to pay for the privelege of earning money, so you can eat. Which you already do, by paying taxes in the first place. In the case of IC's though, it's even worse.

Basicly, the laws are with the employer, and you are left out in the cold, usually. Your situation may vary from mine. Honestly, I hope it does, because I hate to see anyone else get shafted like I did.

[US Citizen]

There is no single definitive test to determine if somoene is an employee or independent contractor, but it is a factual determination after a number of tests are applied and I am sure the link aaron provided goes into that.

An independent contractor pays both the employee's and employer's portion of the Social Security taxes, though the employer's portion is a deduction to determining adjusted gross income. As long as your AGI remains a positive number, the employer's portion of the tax is a wash, kinda of like a business deduction, but you will probably not be eligible for unemployment. I can't say as to whether you would be eligible for worker's compensation.

You can report your boss to the Department of Labor, but don't expect to remain employed for long, or at least for the relationship to be as good as it used to be.

[Lawvester]

To determine if you are a Employee or an Independent Contractor you should consider these aspects of the job:
Factors to consider:

* What instructions are given to the worker?
* Is any training provided to the worker?
* Is there a schedule of hours of work per day, week or month?
* Compensation by task – or by the hour, week or month?
* Are business and/or travel expenses paid by company or the worker?
* Is the worker full-time work at one company or working for a number companies at the same time?