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  1. #1

    Default Misclassified As an Independent Contractor (What Next)

    My question involves labor and employment law for the state of: Colorado/Ohio

    A recent pay dispute (which I'm also getting help with here on the forums) led me to start doing research into both Colorado and Ohio labor laws. To my dismay, I found that many of these protections only apply to actual employees (and not independent contractors). But to my surprise, I found something else quite interesting. There were a few Colorado based tax attorney sites that list several ways people are often misclassified as an independent contractor. To my shock, I ticked like 7 out of 10 boxes! I've also heard this can result in an employer being required to pay back taxes owned to their misclassified employee (all of which I've had to pay out of pocket on my own).

    Just a few questions on this. How hard is it to win a case like this, or are they usually unwinnable cases? Because I feel I can make a very good argument that I was treated as an employee but only compensated as a 1099. Also, if I did want to pursue it, what kind of attorney would I need? Would tax attorneys handle the actual suit? And if I lose, could I open myself up to any legal trouble?

  2. #2
    Join Date
    Oct 2006
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    16,474

    Default Re: Misclassified As an Independent Contractor (What Next)

    Quote Quoting isitlegalmk
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    My question involves labor and employment law for the state of: Colorado/Ohio

    A recent pay dispute (which I'm also getting help with here on the forums) led me to start doing research into both Colorado and Ohio labor laws. To my dismay, I found that many of these protections only apply to actual employees (and not independent contractors). But to my surprise, I found something else quite interesting. There were a few Colorado based tax attorney sites that list several ways people are often misclassified as an independent contractor. To my shock, I ticked like 7 out of 10 boxes! I've also heard this can result in an employer being required to pay back taxes owned to their misclassified employee (all of which I've had to pay out of pocket on my own).

    Just a few questions on this. How hard is it to win a case like this, or are they usually unwinnable cases? Because I feel I can make a very good argument that I was treated as an employee but only compensated as a 1099. Also, if I did want to pursue it, what kind of attorney would I need? Would tax attorneys handle the actual suit? And if I lose, could I open myself up to any legal trouble?
    You would not need an attorney at all. You would file Form SS-8 with the IRS and they would make the determination as to whether or not you were misclassified as an independent contractor when you should have been treated as an employee. They will then go after the employer.

    The only taxes that you paid, that you wouldn't have to pay anyway was 1/2 of your self employment tax. You would have had to pay the other half of the self employment tax (substitute for Social Security and Medicare taxes) anyway as well as regular income tax. You could amend your returns for the years in question by removing Schedule C and reporting the income on Form 8919 instead. However, if you took any expenses on Schedule C that could be problematic.

    Get a consult with a local tax professional before you proceed.

  3. #3
    Join Date
    Jan 2011
    Posts
    401

    Default Re: Misclassified As an Independent Contractor (What Next)

    Both Ohio and Colorado also have their own tests of whether you are an employee or contractor. Since the company is in Colorado but you were working in Ohio, I don't know which state's rules would apply, or if both would. I would call both and find out.

    https://jfs.ohio.gov/ouio/uctax/comnfaq.stm

    https://cdle.colorado.gov/independent-contractors

    You can get the IRS SS-8 at https://www.irs.gov/forms-pubs/about-form-ss-8

    You said in your other post that you are being stiffed out of your last month's payment of about $2,000. If the IRS does in fact determine that you were an employee and not an IC, you can file a wage claim in Colorado. The statute of limitations to file is two years. Since the IRS can take up to a year to make a determination on whether you were an employee versus IC once it receives your SS-8 form, I would get the SS-8 submitted ASAP.

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