USA Did my employer Misclassify me as an independent contractor?

[Rwest522]

I've been working as a studio manager and front desk associate for a yoga studio for the last 5 months. I was hired as an "independent contractor." being unemployed and desperate for work, I was thrilled to have income coming in! I am starting to realize that I probably should've been classified as an "employee," (my boss set my hours, I'm on regular payroll, as are the other front desk workers who are I.C's, I do the work she asks of me, and employment is ongoing) I've been a bit confused on whether or not this in beneficial? Some have said I will pay less taxes in the long run, but the idea of a HUGE chunk of money coming out for taxes stresses me out, and there is absolutely nothing for me to write off! Im really not making near enough to save extra each month for taxes. I also recently found out that employers can be fined for Mis-classifying employees. What should i do? Is my employer in the wrong? We have an excellent relationship, but should I bring this up to her? Or is she actually legally classifying me an an independent contractor? Help! Thank you!!

 

[Marshall]

From what you describe, she is almost certainly misclassifying you as an independent contractor.

Whether changing to the proper classification will save you money or not depends on what you are paid. If she pays you the same base pay, your take home pay will go down because she will start deducting the employee portion of FICA plus any Federal and state income tax withholding. On the other hand, your after-tax income will be higher because the employer will pay a share of FICA that would otherwise be paid by you as an independent contractor. Some small businesses might be tempted to reduce the base pay to keep their own costs the same, assuming that their is enough room to do that and still be in compliance with minimum wage laws. If your employer did that, you might see no boost in after tax dollars at all.

You say "Im really not making near enough to save extra each month for taxes." You had better start saving. As an employee, you would have the saving forced on you because amounts would be taken out of each pay check. You need to do exactly the same thing - take the right amount and set it aside. Treat it like it never existed and keep it safely stowed away to pay your taxes.

 

[Rwest522]

Thank you Marshall, I appreciate your response. I receive the same base pay each pay period. I've been saving around 10% of each check, I just cant imagine taking out the 35% that I hear you should as an I.C. She's only owned the business a little over a year, so I think she may be an inexperienced business owner and probably doesn't realize she SHOULD have myself and the rest of the front desk staff as employees. Can she get into trouble for misclassifying us? I want to protect my relationship with her and the business, so I guess my next step is to meet with her, and tell her that we should be employees. Of I do this, will she be required to pay back taxes? Any suggestions???