Am I a 1099 Employee or Is My Boss Doing Something Illegal?

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When a company hires an employee, the company has to pay payroll taxes for that employee and offer the employee access to the company’s benefits if the employee qualifies for them. All of this can get expensive, and many companies try to avoid adding payroll costs for employees that make minimum wage or perform jobs that do not generate the company any revenue.

One of the ways companies try to avoid paying payroll taxes is by claiming an employee is actually an independent contractor. Improperly claiming a worker is a federal offense that could get your employer into a lot of trouble.

The Difference Between a 1099 and a W-2

Company employees get issued a W-2 for taxes that shows all of their deductions. Independent contractors are issued a 1099 that does not remove any taxes for the worker. If you are getting a 1099 from your company, then you are on your own with paying your taxes every year. Independent contractors also do not get benefits, and they pay the company’s share of the payroll taxes every year.

The Difference Between an Employee and an Independent Contractor

An employee is trained by their company, given specific tasks to do, supplied the materials they need to do those tasks, given work space paid for by the company and are supplied a company-issued uniform if it is required. Independent Contractors supply their own computer and materials, provide their own work space, do not work on company property, are not trained by the company and are responsible for paying for all of their own licensing or certifications.

Is My Boss Breaking the Law?

If your boss is asking you to do the duties of an employee but paying you like an independent contractor, then they are violating federal tax and employment laws. Each state also has their own laws on improper use of independent contractors that could get your boss in trouble as well.

What Should You Do?

If the IRS ever decides to investigate your situation, you will more than likely not get in any trouble. But in the meantime, you are paying payroll taxes that your company should be paying and having to worry about paying your own income tax every year. The simple solution is to get a new job. If your boss threatens you in any way, then you may have to contact the IRS to protect yourself.

Independent contractors can save companies money while still offering professional services. But when companies abuse the independent contractor status, then it is the employees who wind up having to pay more in the end.