How to Determine Tax Status
The tax implications of being classified as an employee or a self-employed independent contractor are significant. Companies do not have to pay taxes and other costs for independent contractors and, not surprisingly, prefer these types of workers over employees. If you are classified as an independent contractor, though, you must face a hefty tax bill as a result.
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Instructions
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Review a detailed description of your job and note any language that makes reference to whether you will be supervised. A description that indicates that your work is unsupervised weighs in favor of you being an independent contractor.
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Review how you are compensated. If you have a benefits package, paid holidays, group health insurance or other incentives, these facts favor an employee classification. On the other hand, if you are compensated based only on your work output, this weighs in favor of an independent contractor classification.
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Compare your duties and responsibilities to others'. Research similar positions in your particular industry and see whether it is customary that workers be self-employed or work as an employee.
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Evaluate the amount of control you have in performing your duties. This is the ultimate difference between an independent contractor and an employee. An employee generally has little control over her work hours and assignments and often does not provide her own supplies to the workplace.
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File a Form SS-8. To obtain an official determination on your proper tax status as an employee or an independent contractor, you or the company you work for can file a Form SS-8 with the IRS. This form is a questionnaire that asks a variety of questions relating to duties of the worker, history of payment and other factors that bear on the amount of control the company has over you in your job duties.
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Tips & Warnings
Clear up any questions you may have about how your company will classify you and pay you prior to accepting any work. Also ask for a written, detailed job description prior to accepting any work.
No one factor or characteristic of your job will determine your tax status as an employee or an independent contractor. Instead, you must weigh all the factors in light of your particular circumstances.
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