Worker’s Classifications

As a business owner, it’s important to understand the different classifications for workers when it comes to income tax purposes. Misclassifying workers can result in penalties and back taxes owed to the IRS, so it’s crucial to get it right from the start. Here’s a breakdown of the three main classifications:

  1. Employee

An employee is someone who works for your company and is under your control when it comes to the work they do and how they do it. As an employer, you must withhold and pay Social Security, Medicare, and federal income taxes from your wages. You’re also responsible for paying unemployment and workers’ compensation insurance for them.

  1. Independent Contractor

An independent contractor is someone who works for themselves and is hired by your company to do a specific task or project. They’re considered self-employed, so you don’t need to withhold or pay taxes for them. However, you should still provide them with a Form 1099-MISC at the end of the year if you paid them $600 or more for their services.

It’s important to note that the IRS has specific guidelines for determining whether someone is an independent contractor or an employee. Some factors to consider include the degree of control you have over their work, whether they’re using their own equipment or tools, and whether they’re working for other companies as well.

  1. Statutory Employee

A statutory employee is a hybrid between an employee and an independent contractor. They’re treated as employees for Social Security and Medicare tax purposes but are considered independent contractors for federal income tax purposes. Examples of statutory employees include drivers, salespeople, and home-based workers.

If you’re unsure about how to classify a worker, it’s always best to consult with a tax professional. At A Tax Defense and Accounting, LLC, we specialize in helping businesses navigate the complex world of tax accounting. Contact us today at 1-888-455-3111 or visit our website at to schedule a consultation.

CTA: Need help navigating worker’s classification for income tax purposes? Contact A Tax Defense and Accounting, LLC today at 1-888-455-3111 or visit our website at to schedule a consultation.