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How your classification could affect your tax return

At this time of year, most employees are concerned with how much of a refund check they will receive from the federal government after filing their income tax returns. After all, tax season is not just big business for tax preparers. Retailers also want to benefit from the extra money that workers will receive.

Nevertheless, with all the money that will be distributed in refunds, many workers may end up disappointed and may even have to pay Uncle Sam. This is because many employees, especially temporary workers, may not have enough taken out of their regular incomes to compensate for taxes. While it may remain how much in actual taxes that will be owed, it largely depends on an employee’s classification; whether they are seen as employees or contractors.

How is the difference determined? The following will briefly explain. 

Essentially, there are a number of factors that are considered in defining the difference between an employee and a contractor. They include, but are not limited to, the degree of control the employer maintains over how the work is done and when the worker must complete it. For example, if the employer sets regular hours for the worker, provides materials and/or training, and the employer determines how the work is supposed to be done, it is likely that the worker will be classified as an employee.

In this situation, the employer is responsible for Social Security and Medicare taxes (otherwise known as FICA) and withholding federal and state income taxes as directed by the employee.  So if you have questions about how you are classified for tax purposes, an experienced employment law attorney can advise you. 

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