What are you losing by being classified as an independent contractor when you should be paid as an employee? Money!
1099 vs. W2?
If you are an employee in Minnesota you should receive a W2 form at the end of the year that summarizes your compensation including wages, health benefits, retirement, and social security (FICA), including the employer’s contributions on your behalf. If you do not receive a W2 and are sent a 1099 at the end of the year, you are working as an independent contractor and you are liable for all taxes and insurance. In fact, whether you are sent a 1099 or not, you are liable for all applicable taxes and insurance when working as an independent contractor.
Who Is An Independent Contractor?
If you answer ‘no’ to any of the questions below, you are likely not an independent contractor and should be classified as an employee with your employer paying your FICA and worker’s compensation and other benefits.
- Do you have your own office and equipment?
- Do you file self-employment income tax returns with the Minnesota Department of Revenue using a business tax I.D. number?
- Do you have a contract for each project with a set price for services?
- Do you decide how and when to perform your work?
- Do you pay for any materials and your own equipment?
- Are you “on the hook” for failure to complete work?
- Are you getting paid per-job AND not on an hourly basis?
- Do your earnings depend on your job quote minus your business expenditures, and NOT on an hourly wage?
- Are you registered as a construction contractor with the Minnesota Department of Labor?
As an independent contractor you’re potentially losing:
- 7.65% of your income.
Employers must pay half of the employees’ FICA (social security) taxes. That is 7.65% of the employee’s income. The employee pays the other half. As an independent contractor you must pay the entire FICA contribution or 15.3% of your income. FICA taxes are required.
- The protections of minimum wage laws.
- The right to overtime pay.
- The right to unemployment insurance.
- Possibly employee benefits such as health insurance, paid time off and retirement contributions.
- Being free from personal liability in the event of an accident or damage to property.
How Can You Protect Your Rights?
You can file a claim for wages owed and potentially be entitled to additional damages and costs. Contact FCF at (651)797-2726, toll free at (844)777-0606, or via email at firstname.lastname@example.org . An employer is barred from retaliating against anyone seeking to protect his or her rights.