As someone who performs work for another person or business in California in exchange for money, how the paying party classifies you matters. There are important differences between being an actual employee and being an independent contractor. Yet, sometimes, whether intentionally or not, employers misclassify workers. When they do so, it has the potential to impact everything from what benefits you receive, if any, to how much control your employer has over you.
Per the IRS, employers have specific tax obligations if you are an actual employee of theirs. However, they do not have to withhold or pay taxes if you are an independent contractor.
How to determine your correct employment status
Several things should help determine whether you are an employee or an independent contractor. If you receive benefits from your employer, such as paid time off or insurance benefits, this indicates that you are an employee and not a contractor. The same holds true if the party paying you has control over when and how you work and how you receive payment.
What to do if your employer misclassified you
If your employer misclassifies you and the IRS finds out, your employer may have to pay past employment taxes. If you believe your employer misclassified you as an independent contractor when, in actuality, you are an employee, you have the option of filing Form 8919, Uncollected Social Security and Medicare tax on wages.
Employers stand to make money by misclassifying you. However, you may suffer losses in the event of employee misclassification and may have recourse if you believe your employer mistakenly classified you as an independent contractor.
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