Some employers may misclassify employees as independent contractors to save money, but doing so can be in violation of employment law. Even when workers legally are considered employees, they may be misclassified to avoid paying taxes or to skirt around wage and hour laws. Doing so results in employees being required to pay many of the costs of employment on their own and losing the legal protections they have as employees.
If you are misclassified as an independent contractor, you may:
- Have to pay Social Security and Medicare taxes out of pocket.
- Be ineligible for unemployment benefits.
- Be ineligible for workers’ compensation benefits.
- Have none of the normal workplace rights, such as minimum wage, overtime pay, sick pay, and rest breaks.
- Be ineligible for employee healthcare coverage under the Affordable Care Act.
What Can I Do if I am Misclassified?
If you have a reason to believe that you have been misclassified by your employer, there are several actions you can take to correct this. You deserve the benefits that should come with your position, so it is important to ensure that you are properly classified as an employee. Here are some steps to take to correct your classification.
Talk to Your Employer
You can begin with talking to your employer about the reasons you believe that you are misclassified as an independent contractor instead of an employee. You can request your employer to reconsider your classification, or to provide their reasons for classifying you as an independent contractor.
Contact the IRS
If your employer doesn’t provide a satisfying answer or refuses to talk with you about your classification, you can get the IRS involved. You can request that the IRS determines your employment status for federal tax purposes. This is done by filing IRS Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding. There is no fee for filing this form.
You will be asked a series of questions regarding the nature of your job and how your employer treats you on the job. After receiving the form, the IRS will reach out to your employer for their version of the facts. An IRS determination of your employment status is used for federal tax and withholding purposes, and will only be binding for the IRS. Your employer isn’t bound to follow the determination, but there can be trouble for companies that ignore the IRS decision on your employment status.
File Your Tax Return with IRS Form 8919
This form allows you to avoid paying more than half your Social Security and Medicare taxes on your own. If you are classified as an employee, your employer must pay half of these taxes. If you are classified as an independent contractor, however, you are responsible for the entire amount. If you are wrongly classified as an independent contractor, you shouldn’t have to pay the entire amount. Form 8919 will allow you to report your share of uncollected taxes that are due on your compensation, as if you were an employee. This will allow your Social Security and Medicare taxes to be credited to your record. There are certain requirements you must meet to use Form 8919. These include:
- You filed Form SS-8 and were determined to be an employee by the IRS.
- You were designated a “section 530 employee” by your employer prior to January 1, 1997.
- You received a letter from the IRS which stated you were considered an employee.
- You were previously treated as an employee and are performing services in a similar way and under similar direction and control as other employees.
- Your coworkers, who are performing similar services under similar direction and control, have filed Form SS-8 and received the determination that they are employees.
- You have not yet received a reply for your SS-8 form after filing.
File an Unemployment Insurance Claim
If you are fired or laid off by your employer, you can file an employment insurance claim with your state’s unemployment agency. Be sure to explain that you were misclassified as an independent contractor, rather than an employee. The agency will investigate your employment status on your behalf. If the agency determines that you were wrongly classified, your employer will be responsible for paying your insurance premiums.
File a Workers’ Compensation Claim
If you have sustained an injury in the course of your work, and your employer refuses to provide you with workers’ compensation coverage, you can file a claim with the state workers’ compensation insurance agency. They may be able to help you receive the compensation you need, even if you’ve been misclassified.
Get Help froth Memphis Employment Attorneys
At Donati Law, PLLC, we understand that employment law can be complex, and employees who feel they are being misclassified by their employer may have a difficult time taking action against their employer. Our Memphis employment attorneys can help you determine if you are misclassified as an independent contractor and if you are entitled to the same protections and rights that employees are. Our team is prepared to support you through your case with one-on-one legal service and unique solutions to your employment law issues.
Contact our offices for a consultation by calling (901) 209-5500.