For tax purposes, an independent contractor is often listed as a “1099 employee.” This means an individual may work for a company and receive a paycheck, but the employer does not have to withhold taxes, contribute to Social Security and/or Medicare or provide any health and/or retirement benefits.
This means the worker is responsible for paying all the taxes, not to mention performing their own withholding through quarterly payments to the IRS. In some instances, the employee is not even aware of the situation and is hit with penalties and other fees for not paying their taxes.
Employers in some states are not required to pay workers’ compensation or unemployment insurance premiums on anyone classified as a 1099 employee. In these instances, the 1099 employee is responsible for paying these premiums.
Not only does misclassifying hurt workers, but it hurts other contractors.
The misclassification of employees creates an unfair advantage for the law-violating contractor, and potentially punishes contractors who follow the law.
By not paying employees the correct amount of and then paying taxes and other fees, the company does not have to charge as much and thus, can undercut their competitors’ bid on a job.
To determine the difference between an employee and an independent contractor, please click here.
The members of IBEW 163 are not independent contractors. All our licensed electricians are covered by a Collective Bargaining Agreement and paid by our signatory contractors as employees.