Worker Classification: Employee or Contractor?
Worker classification is one of the most common, recurring tax
disputes. At its most basic level, the question boils down to this:
Is the worker an employee or an independent contractor? The risks
of getting it wrong can be significant: Back taxes, penalties, Affordable Care Act penalties, back wages-even
criminal exposure in some cases.
Worker classification determines whether an
employer is required to withhold income taxes and pay social
security, medicare taxes, and unemployment tax on the wages paid to
a worker. The general, black-letter law provides that a worker is
an independent contractor if the person or entity paying them has
the right to control or direct only the result of the work, not
what will be done to achieve that result or how
it will be done. Employers can have major-sometimes
existential-risk from misclassifying workers. If that risk exists,
they should contact a tax attorney proactively, as there
