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Why would an employer misclassify independent contractors?

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In general, employers can classify workers in two ways: employee or independent contractor. There are perks to employers when they call workers independent contractors, which is why many employers may try to classify their workers in this way. However, laws step in to stop employers from wrongfully classifying their employees.

The IRS has always had strict rules about what makes a worker an independent contractor instead of an employee. However, California recently passes its own laws strengthening the definition and further limiting what qualifies a worker as an independent contractor. Despite these laws, many employers still want to classify workers in this way.

Huge savings

According to USA Today, one of the biggest reasons why an employer would prefer to classify you as an independent contractor instead of an employee is that is present a huge financial savings. Your employer will not have to pay payroll taxes for you because you are technically working for yourself and not them. In addition, since you work for yourself, your employer is not responsible to offer you benefits, such as health insurance, paid vacation or retirement plans.

The money a company can save just by not classifying you as an employee is enough for many employers to move forward with a classification even if it is not accurate.

The downside

If you face a wrongful classification, it is deferential to you. You lose out on the benefits your employer should offer you. Furthermore, you become responsible for your own taxes, which could present some issues when it comes time to do your taxes if you do not plan ahead. It is important if you feel your employer misclassified you, then you should speak up about it.