I worked from my home as a writer/graphic designer for an out-of-state greeting card company for several years under an "Independent Contractor" agreement. I owe a big back tax debt from the years 2000-2003, because I got behind on my estimated tax payments and then my client cut my pay significantly in 2003 (breeching the contract).
After reading another post on this forum about the IRS' definition of an Independent Contractor vs. an employee, I'm beginning to think that I probably should have been considered an employee all of those years and that my client fradulently considered me an independent contractor so that he wouldn't have to pay my withholding.
According to my contract, I had to work for the client exclusively. In addition, the contract specifies my hours. I had to work 80+ hours a week, with only one day off a month, and two weeks paid vacation a year. I think, these requirements would put me in the "employee" definition. What do you think?
I did have to pay my own expenses...my own computer, internet service etc, and I had to license costly materials out of my own pocket (which I, of course, reported as business expenses on my 1040s). Sometimes, however, the client would license materials.
Anyway, I'm wondering what would happen if the IRS, who is now considering an installment agreement request on the back taxes, determines that I was an employee. How would it affect those tax years that I'm behind on, because he would have had to pay self-employment taxes? What about some of the penalities and interest I owe on my back taxes? Would they become his responsibility?