Withholding for Payroll Taxes & Misclassifying Workers as Independent Contractors: Why This Can Hurt You at Tax Time.

Galvin B. Kennedy
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Galvin Kennedy is a founding partner of Kennedy Hodges. He focuses his practice to overtime and wage claims.
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Payroll taxes and being misclassified as independent contractorThe bittersweet truth about withholding for payroll taxes and misclassifying workers as independent contractors.  

What feels so good now will make you sick at tax time.

Hurrah! My boss said I'm an independent contractor, so no taxes need to be withheld from my paycheck. You will be singing this song every week you look at your paycheck and notice that no taxes are being withheld by your company. That means more cash for you today, true. But in reality it means less money for you over the year. In the end, you have to pay your share of the taxes AND your employer's share of the taxes!

Dirty Little Tricks

Misclassifying workers as independent contractors is one of the oldest tricks in the dirty employer's handbook. Employees are duped into believing they are better off due to no withholding, but they are penalized at the back end.

The Law On Withholding: Your Employer Should Pay Half

If you are an employee, your employer must make payroll deductions on your earnings and pay your share of those taxes. If your employer is not withholding taxes, you have likely been classified as an Independent Contractor and self-employment taxes become your burden on Tax Day. Now you have to pay your share and your employer's share of the taxes. This is one of the top wage scams employers use to keep money in their pocket.

What's The Difference Between An Employee And An Independent Contractor?

As an independent contractor:

  • You are not paid overtime
  • You are responsible for paying your own FICA taxes
  • You do not get sick days, vacation time, or health benefits

Payroll Tax Deductions From An Employee's Paycheck:

Payroll taxes withheld from an employee's paycheck are required by law for non-exempt employees. Payroll deductions include:

  • Federal income tax withholding
  • Social Security and Medicare tax withholding - FICA payments
  • State income tax withholding 
  • Local tax withholdings

If your employer pays you incorrectly learn how you can recover up to 3 years of your back pay.

Don't Let Your Employer Cheat You Out Of Your Wages Any Longer.

If your employer pays you incorrectly or you aren't sure if you've been misclassified as an independent contractor, order our free book to learn answers to your questions. This free wage and overtime guide will teach you how you can recover your hard-earned wages for up to 3 years back. Call 888-449-2068 to order your free book today, or fill out our online form.

Have you been Misclassified as an Independent Contractor in Texas?

How to know if your employer has misclassified you as an Independent Contractor: Learn 3 factors that affect employee FLSA status.

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