502-581-9861 | info@talisgroup.com

Independent Contractors

Is your Staffing Company treating you as an Independent Contractor and NOT an Employee?  If so, you could be left holding the bag! These are your risks!

Employee- No risk to you!

Most staffing companies will send you on assignment as their employee. As such, you have several protections:

  1. Your employer will withhold all the federal, state and local taxes from your wages and remit them to the proper taxing authorities for you.
  2. Your employer will pay 7.65% of your wages out of their own money to match the 7.65% Social Security/Medicare(FICA) tax withheld from your earnings.
  3. Your employer maintains workers compensation insurance (in case you are injured on the job) and unemployment insurance.

Independent Contractor- You set aside $$ to pay your quarterly tax payments!

Some employers want to classify you as an independent contractor because it saves them many costs such as the Social Security/Medicare Tax (FICA) match of 7.65%, workers compensation insurance and unemployment insurance as well as several administrative duties such as reporting your tax withholdings.

  1. You are responsible for setting aside and paying quarterly taxes to IRS, State and Local governments.  Check with your tax advisor on how to file.
  2. You are responsible for self- employment tax (social security) which is 15.30% of your wages instead of FICA tax of 7.65%.  This costs you more in taxes!!
  1. You are NOT covered by workers compensation or unemployment insurance.

At the end of the year, your staffing company will report to the IRS the income paid to you as an independent contractor via form 1099-MISC. The IRS will then know you have earnings as an Independent Contractor and check to ensure you have properly made quarterly estimated tax payments. They assess significant penalties and interest if quarterly payments weren’t made. And due to the fact that the IRS works approximately two years behind….these interest assessments can be high!

Let’s look at $100 earned as an Independent Contractor Vs. Employee

$100 Independent Contractor Income $100 Gross Wages (Employee) 

(15.30)

Social Security (FICA)

(7.65)

Social Security (FICA)

(7.0)

Federal Income Tax(est.)

(7.00)

Federal Income Tax (est.)

(3.50)

Kentucky Income Tax (est.)

(3.50)

Kentucky Income Tax (est.)

(2.20)

Louisville/Jeff County (est)

(2.20)

Louisville/Jeff County (est.)

$(28.00)

Taxes to remit quarterly to Gov’t

$(20.35)

Taxes paid to Gov’t for you
$72.00
  Net Income
 $79.65
  Net Wages (More $$!!!)