You’ve been working for a particular California company as an independent contractor for quite some time. You are happy with your wages and generally satisfied with your work environment, except that you believe you should actually be classified as an employee of the company, not an independent worker. Some people might ask you why you care as long as you have a job and are earning income.
You can tell them that you are definitely not the only one who cares because the Internal Revenue Service takes misclassification of workers quite seriously. There are several factors that help determine whether you’re a de facto employee or a freelancer. Understanding the difference and knowing what options are available to help rectify a problem situation can keep the IRS off your back and your employer on the straight and narrow.
Did you go through training?
A major difference between independently hired workers and payroll employees has to do with training. California employers are obligated, as are all others throughout the nation, to provide proper training and equipment to all employees to help them avoid workplace hazards and carry out their duties as efficiently and safely as possible. If you went through training before starting your new job, you are likely an employee, not an independent contractor.
Are you involved in business operations?
Another way the IRS determines how your employer should classify you as a worker is whether you come and go to perform duties on an intermittent basis as needed. Let’s say the California company where you work calls you in when computers or other equipment are in need of repair. The IRS would generally consider this a non-employee situation. However, if you regularly run programs on the computer that are integral to the daily function of the business or are using equipment to run production, you may be an employee.
When do you work?
If you carry out your workplace duties according to a set schedule or hours, the IRS is not likely to consider this arrangement an independent hire. On the other hand, if you set your own hours, you are likely an independent contractor. By the same token, if the company that hired you requires you to work full time, you are undoubtedly an employee.
The Internal Revenue Service takes approximately 20 factors into consideration when trying to determine whether an employer has properly classified a worker. Various exemptions may apply that impact your situation, such as if you work less than 1,000 hours in 12 consecutive months. If you think you are an employee classified as an independent contractor or vice versa, you may want to ask someone well-versed in California employment law to review your case.