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  1. #1
    Join Date
    Mar 2013
    Posts
    1

    Question Classification of Employee Laid Off and Rehired As Independent Contractor

    My question involves independent contractors in the state of: Illinois

    Basically, the magazine I worked for as an editor for 12 years laid me off and rehired me as an indepedent contractor in 2009. Recently, I found out about IRS Publication 1779 and Form SS-8 and fear I have been misclassified. Filling out the forms may end my work, especially if I'm found to be an employee, but I'm more concerned with correctly filing taxes (and I'm willing to lose my work if it keeps them from doing this to my coworkers that I love).

    Here's the rundown of how this transpired:
    * Hired in 1997 as a full time editor for unnamed magazine (near Chicago).
    * Fought and beat cancer twice, in 2004 and 2006 (perhaps relevant as benefits were impacted).
    * In 2008, we adopted our first and only child.
    * The CEO told me that I shouldn't take maternity leave because I didn't give birth, and he was angry with me for doing so saying that I was taking advantage of it. Unfortunately, there were no witnesses to this conversation.
    * While on materinity leave, I was notified they were talking layoffs and said any help saving money was appreciated.
    * In January 2009, returned from materinity leave and offered to go part time to help them save and help me balance family, a win win.
    * In February 2009, they notified me that they were terminating my employment and would offer me the same job from home as a contractor, and my choice was to accept the contract work or be unemployed. With a new mouth to feed, I reluctantly accepted.
    * Their savings were on pay if hourly does not fill former salaried work, severance pay (policy only gives this to full timers and i forfieted it going part time), taxes, not having to pay me any sick leave (i had cancer twice), and I lost my life insurance (make that cancer twice with children). Of course, verbally they said I could make my own hours and spend time with my kids. They also said they thought making me a stay at home mom was giving me what I wanted... but they did not ever mention motherhood in writing only that I was "part time" and the "logical cut."

    Here is how my "contract" arrangement works:
    * There is no written or signed contract. I complete timesheets and employee reimbursement requests each month. I do not invoice them.
    * Paid hourly, not flat rate for the products.
    * My title is contributing editor for the magazine, and freelance editor on taxes.
    * They send me 1099s instead of W-2's for the same basic pay, minus what they can trim here and there.
    * My duties are recurring. Same work every month, with the same deadlines, although i make my own hours as long as deadlines are met.
    * I work from home on my own computer, but I otherwise use their resources and cannot share my product with others.
    * The fully dictate how I must do the work.

    Given that it is not uncommon for editors to freelance, even though I was forced into mine, and as I am part time, not full time, I am not clear as to whether an SS-8 would be a waste of time.

    I want my taxes to be correct, and if I'm ruled an employee they will probably end our relationship but think twice about doing this again to someone else. Even if I'm ruled a contractor, they may let me go just for filing, which is why I wanted to check here first.

    Guidance much appreciated before I stick my neck out.

  2. #2
    Join Date
    Mar 2013
    Posts
    17,288

    Default Re: Classification of Employee Laid Off and Rehired As Independent Contractor

    The IRS, of course, has guidelines for determining employee vs IC status.

    http://www.irs.gov/Businesses/Small-...or-Employee%3F

    I read it but couldn't be sure whether you're an employee or IC.

    However, I found an article that seems to clarify the IRS material with respect to freelance writers and editors and there are a couple of points that lead me to conclude that you are an IC. Understand though that I am not a lawyer or an expert.

    "In general, according to the IRS, if a company has the right to control the result of an individual's efforts but not the means by which he or she achieves those efforts, the individual is an independent contractor."

    Your statement that they fully dictate how you must do the work needs clarification. It seem like the company is not controlling the means by which you do the work, just the result. If that's the case, given all the other factors, you might actually be an IC.

    Another part of the article gives the following example:

    "A computer programmer is laid off when his company downsizes, but the company takes him on as an independent contractor. The company provides a contract that specifies clearly the work relationship, and the programmer does most of his work from his home. He is neither expected nor allowed to attend company meetings, and the company provides him only with product specifications, not instructions on how to do his work. The IRS does consider this worker an independent contractor. If he were required to attend meetings and be on-site during regular business hours, the IRS would likely view him as an employee."

    That seems to describe your situation as well.

    Here's a link to the article:

    http://www.enotes.com/labor-law-refe...rs-freelancers

    It also occurs to me that you are free to hire yourself out to other magazines and publishers and that would also lean you toward IC status. That you might not actually be doing that doesn't change the fact that you have the option. Might be something you should be considering, given your experience.

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