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Both California employers and California workers can ask the IRS to make a determination on whether a specific individual is an independent contractor, or an employee. To do so, you will need to complete IRS Form SS-8: Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding.
Generally, a worker who receives a Form 1099 for services provided as an independent contractor must report the income on Schedule C and pay self-employment tax on the net profit, using Schedule SE. As an independent contractor, the worker is required to pay 15.3% of gross wages toward Social Security and Medicare tax. However, if the employee was erroneously misclassified as an independent contractor by an employer, the employee should file IRS Form 8919 with the IRS. By filing IRS Form 8919 to compute and report the employee's share of uncollected Social Security and Medicare taxes due on the compensation paid, the misclassified employee will only pay 6.2% of gross wages toward Social Security and 1.45% of gross wages toward Medicare (7.65% total), and the IRS will credit the payment to the employee's Social Security record.
If you as a California employer misclassify an employee as an independent contractor and you have no reasonable basis for doing so, you may be held liable not only for the misclassified worker's employment taxes, but also a 100% penalty. See, IRS Code §3509.
To read more on how to determine if a worker is an employee or independent contractor, click here.
Our employment law practice consists of: (1) assisting employees with their wage claims and (2) counseling employers who seek to comply with new state and federal employment laws, providing human resource training, and providing essential contracts and employee policies to prevent employee lawsuits. To schedule a consultation call 818-849-5206 or Send Us An Email.
Related Articles:
- How To Determine If A Worker Is An Independent Contractor or Employee?
- Fines and Penalties if California Employees Are Misclassified as Independent Contractors
- Reporting Requirements for Independent Contractors
California Employment Law attorney, Melissa C. Marsh, is based in Sherman Oaks and West Hollywood, and is available to serve small and midsize businesses throughout Los Angeles County, including: West Hollywood, Miracle Mile, Beverly Hills, Century City, Santa Monica, Burbank, North Hollywood, Valley Village, Toluca Lake, Studio City, Sherman Oaks, Van Nuys, Encino, and Woodland Hills.
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Located in Los Angeles, California, the Law Office of Melissa C. Marsh handles business law and corporation law matters as a lawyer for clients throughout Los Angeles including Burbank, Sherman Oaks, Studio City, Valley Village, North Hollywood, Woodland Hills, Hollywood, West LA as well as Riverside County, San Fernando, Ventura County, and Santa Clarita. Attorney Melissa C. Marsh has considerable experience handling business matters both nationally and internationally. We routinely assist our clients with incorporation, forming a California corporation, forming a California llc, partnership, annual minutes, shareholder meetings, director meetings, getting a taxpayer ID number (EIN), buying a business, selling a business, commercial lease review, employee disputes, independent contractors, construction, and personal matters such as preparing a will, living trust, power of attorney, health care directive, and more.