Worker Misclassification

Do you know about worker misclassification?

Misclassification is when an employer wrongly calls their worker an "independent contractor" and gives them a Form 1099 (with no taxes withheld) instead of a Form W-2 (with taxes withheld) even though the worker is really an employee. When workers are misclassified as independent contractors, they owe more in Social Security and Medicare taxes than they should and they lose out on key benefits employees enjoy (such as minimum wage and overtime pay).

What is misclassification?

"Independent contractor" is a category used for freelancers, self-employed people, and people with their own businesses. But employers often incorrectly categorize workers as independent contractors when they were really employees.

"Misclassified" workers end up paying 15.3% of their wages in Social Security and Medicare tax, instead of the 7.65% regular employees are supposed to pay

How do I know if I was misclassified?

Even if your employer called you an independent contractor, if you were treated as a regular worker and not someone who was self-employed, you may have really been an employee. Your correct classification depends on the specific facts of your work-- it's not your employer's decision.

Use these questions to help you figure out whether you were an employee or an independent contractor: 

• Did you have a boss or supervisor? If so, it's likely that you are an employee.
• Do you clock in or otherwise report your hours? If so, it's likely that you are an employee.
• Do you have your own business? If so, it's likely that you are NOT an employee.

PLA's Low Income Taxpayer Clinic can help taxpayers challenge their misclassification before the IRS so they only pay their correct share of taxes. 

Learn more about worker misclassification from PLA Staff Attorney Omeed Firouzi: