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Reply 1
Odella:
The difference between an employee and an independent
contractor, is how the employer pays them and how their taxes
are paid. An employee is paid by the hour, salary, commission
or combination of both. An employee also could get overtime.
An employee receive a W-2 form, which shows their yearly
income. The reason that they receive a W-2, because their
employer withhold federal and state income taxes and FICA
taxes, which is social security and medicare.
An independent contractor is provided a 1099, the employer that
they do work for does not withheld their federal, state and FICA
taxes from the amount the company pay's them. An independent
contractor is liable for their own income taxes, which is called
self-employment. However, an independent contractor works
without the legal amenities that will protect them, but an
employee does. For example, wage and hour laws, workers
compensation and unemployment benefits.
There have been several cases, that have led to companies being
penalized, by the mis-classification of their employees. When
an employer mis-classify an employee, they would label he/she
as an independent contractor; because this will disable the
company in paying taxes on employees. Such as unemployment
taxes, unemployment insurance and workers compensation.
When companies mis-classify their employees, will cause an
effect on the state and federal government. That is short
changing them on their tax revenue by millions of dollars. With
mis-classifying employees, this will be a legal and ethical issue.
For instance, the reason why companies will mis-classify an
employee and an independent contractor is, to save on labor
costs. Labor costs is a major portion of the company. overhead.
Mis-classifying workers has a big negative result at the end, for
the company. For example, when a company intentionally
classify employees as independent contractors; it becomes
unethical. This is a fraudulent act toward the state and federal
governments.
As a result, the state and federal have taken action to penalize
companies, who have been mis-classifying their employees. The
IRS have implemented some test in reference to decipher an
employee from an independent contractor. The test consist of
behavioral control, financial control and type of responsibility.
Fines are generated from the U.S. Department of Labor (DOL),
IRS and other state agencies. Some of the fines that companies
are responsible for is, back pay on taxes, interest on employees'
wages and FICA taxes that were not withheld. Failure to make
payments to the government, can produce additional fines.
Reference
Post, J. (2018, September 20). Worker Classification: What You
Need to Know about Employee vs. Contractor. Retrieved from
https://www.businessnewsdaily.com/770-contract-vs-
employees-what-you-need-to-know.html.
Reply 2
Zach:
To safeguard against misclassification of workers, the IRS has
compiled a list of 20 factors to help individuals and employers
understand the main differences between an employee and
independent contractor. The individual is an employee if they
are bound by the employer to perform work in a specific
manner, within certain hours, and while on the employer’s
physical premises. By contrast, independent contractors retain
greater freedom to accomplish the job as they deem appropriate,
when it fits their schedule, and generally do so remotely.
Compensation offers further distinction as employees are
generally paid by the hour or period, and independent
contractors generally receive payment for the completion of a
job, or straight commission. There are many significant
distinctions between employees and independent contractors,
but the last to note at this juncture is for whom the individual is
performing work – an independent contractor generally provides
the same service to a number of different firms simultaneously,
while also making those services readily available to the general
public. In contrast, employees are bound to provide services to
a specific employer within the aforementioned confines,
therefore making it impossible to provide such services to the
general public.
Accurately classifying employees and independent contractors
is very important for IRS tax purposes. If an individual is an
employee, the employer has tax responsibility on the
employee’s behalf, such as withholding payroll taxes and social
security contributions. Conversely, when the individual is an
independent contractor and receives a 1099 to reflect their
earnings, the client for whom the contractor does work does not
have such a tax responsibility – that responsibility is 100% the
contractor’s.
Some employers have misclassified employees as independent
contractors in order to avoid tax responsibility, which creates
both a legal and ethical dilemma. If an individual is
misclassified as an independent contractor instead of an
employee, they may miss out on minimum wage and overtime
compensation – which may be beneficial to the company, but
certainly not for the individual. In this case, the
misclassification could cost the company dearly in the long-run
as it would be held liable for all the deductions that should have
been withheld from the individual’s pay, including taxes, FICA
and FUTA contributions, and penalties for the misclassification.
References:
Bennett-Alexander, D. & Hartman, L. (2015). Employment law
for business (8th ed.). New York, NY: McGraw-Hill Education.
Rice, E. M. (n.d.). The Consequences of Misclassifying
Employees. Retrieved October 22, 2019, from
https://www.innovativeemployeesolutions.com/articles/the-
consequences-of-misclassifying-employees/.

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Reply 1 OdellaThe difference between an employee and an indep.docx

  • 1. Reply 1 Odella: The difference between an employee and an independent contractor, is how the employer pays them and how their taxes are paid. An employee is paid by the hour, salary, commission or combination of both. An employee also could get overtime. An employee receive a W-2 form, which shows their yearly income. The reason that they receive a W-2, because their employer withhold federal and state income taxes and FICA taxes, which is social security and medicare. An independent contractor is provided a 1099, the employer that they do work for does not withheld their federal, state and FICA taxes from the amount the company pay's them. An independent contractor is liable for their own income taxes, which is called self-employment. However, an independent contractor works without the legal amenities that will protect them, but an employee does. For example, wage and hour laws, workers compensation and unemployment benefits. There have been several cases, that have led to companies being penalized, by the mis-classification of their employees. When an employer mis-classify an employee, they would label he/she as an independent contractor; because this will disable the company in paying taxes on employees. Such as unemployment taxes, unemployment insurance and workers compensation. When companies mis-classify their employees, will cause an effect on the state and federal government. That is short changing them on their tax revenue by millions of dollars. With mis-classifying employees, this will be a legal and ethical issue. For instance, the reason why companies will mis-classify an employee and an independent contractor is, to save on labor costs. Labor costs is a major portion of the company. overhead. Mis-classifying workers has a big negative result at the end, for the company. For example, when a company intentionally classify employees as independent contractors; it becomes
  • 2. unethical. This is a fraudulent act toward the state and federal governments. As a result, the state and federal have taken action to penalize companies, who have been mis-classifying their employees. The IRS have implemented some test in reference to decipher an employee from an independent contractor. The test consist of behavioral control, financial control and type of responsibility. Fines are generated from the U.S. Department of Labor (DOL), IRS and other state agencies. Some of the fines that companies are responsible for is, back pay on taxes, interest on employees' wages and FICA taxes that were not withheld. Failure to make payments to the government, can produce additional fines. Reference Post, J. (2018, September 20). Worker Classification: What You Need to Know about Employee vs. Contractor. Retrieved from https://www.businessnewsdaily.com/770-contract-vs- employees-what-you-need-to-know.html. Reply 2 Zach: To safeguard against misclassification of workers, the IRS has compiled a list of 20 factors to help individuals and employers understand the main differences between an employee and independent contractor. The individual is an employee if they are bound by the employer to perform work in a specific manner, within certain hours, and while on the employer’s physical premises. By contrast, independent contractors retain greater freedom to accomplish the job as they deem appropriate, when it fits their schedule, and generally do so remotely. Compensation offers further distinction as employees are generally paid by the hour or period, and independent contractors generally receive payment for the completion of a
  • 3. job, or straight commission. There are many significant distinctions between employees and independent contractors, but the last to note at this juncture is for whom the individual is performing work – an independent contractor generally provides the same service to a number of different firms simultaneously, while also making those services readily available to the general public. In contrast, employees are bound to provide services to a specific employer within the aforementioned confines, therefore making it impossible to provide such services to the general public. Accurately classifying employees and independent contractors is very important for IRS tax purposes. If an individual is an employee, the employer has tax responsibility on the employee’s behalf, such as withholding payroll taxes and social security contributions. Conversely, when the individual is an independent contractor and receives a 1099 to reflect their earnings, the client for whom the contractor does work does not have such a tax responsibility – that responsibility is 100% the contractor’s. Some employers have misclassified employees as independent contractors in order to avoid tax responsibility, which creates both a legal and ethical dilemma. If an individual is misclassified as an independent contractor instead of an employee, they may miss out on minimum wage and overtime compensation – which may be beneficial to the company, but certainly not for the individual. In this case, the misclassification could cost the company dearly in the long-run as it would be held liable for all the deductions that should have been withheld from the individual’s pay, including taxes, FICA and FUTA contributions, and penalties for the misclassification. References: Bennett-Alexander, D. & Hartman, L. (2015). Employment law for business (8th ed.). New York, NY: McGraw-Hill Education. Rice, E. M. (n.d.). The Consequences of Misclassifying Employees. Retrieved October 22, 2019, from