Friday, March 18, 2011

Are you really self-employed?

Many businesses mislabel their employees as "self-employed independent contractors" to get Social Security, Medicare, Unemployment, and income tax relief. Generally:
  • an employee is anyone who performs services if the employer can control what will be done and how it will be done.
  • a person is an independent contractor if the employer/supervisor has the right to control or direct only the result of the work and not the means and methods of accomplishing the result.
If you think your employer should treat you as an employee instead of a contractor, file a Form SS-8. If the IRS agrees, they will send to you a determination letter stating you are an employee of that organization. You can then report your wages on Form 8919 and you will only be responsible for your share of Social Security and Medicare taxes. The wages are carried over to line 7 of Form 1040 and the Social Security and Medicare taxes are reported on line 57 of Form 1040.

The IRS has general guidelines for more information.

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