Learning the key differences between independent contractors and employees is crucial when hiring the right type of workers for an organization. Essentially, a lot of the fuss over employee classification boils down to independent contractor vs. employee taxes.
Although an independent contractor and an employee may receive the same pay for similar work, there are major legal differences between the two classifications. Hiring a contract worker may save a business money, but it is not without limitations and potential risks. Before your clients decide which type of worker to use, it’s important for them to look at independent contractor vs. employee taxes to avoid significant consequences.
While companies do not withhold taxes from wages of independent contractors, they withhold Social Security, Medicare, and income taxes from employees. What’s more, labor and employment laws do not apply to independent contractors. Incorrectly withholding taxes and benefits can put a needless burden on both employees and contractors. Many workers today classified as independent contractors are, in fact, employees who should be treated as such for tax purposes. As a result, the IRS frequently conducts worker classification audits that consume a lot of time and money for businesses. If your client misclassifies a worker as an independent contractor, the IRS may order them to pay penalties and back taxes. On top of these, they may also face legal disputes and be liable for the worker’s unreceived benefits.
Part one of our Independent Contractor vs. Employee course aims to prepare you to help your clients avoid worker classification audits, if possible, and assist them when it happens. We will discuss and explain circumstances wherein workers should be considered as independent contractors or employees. With our comprehensive IRS independent contractor or employee guide, learn everything you need to know about classifying workers correctly, avoiding reclassifications, and minimizing reclassification cost if it occurs. Our course materials and other tools were designed to give tax practitioners the proper resources to provide clients with a positive experience.
Have a better understanding of independent contractor vs. employee taxes to grow your practice. Take our course today!
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