- Company’s control on what the worker does and how the job is performed
- Business’ direct control of the financial and business aspects of the worker
- Relationship of the parties in terms of written contracts or employee-type benefits
Misclassification of Workers
Businesses could be held liable for employment taxes if an employee is misclassified without a reasonable basis.
Workers can use Form 8919, Uncollected Social Security and Medicare Tax on Wages, to figure and report their share of uncollected taxes due on their compensation if they believe they have been improperly classified as independent contractors
Voluntary Classification Settlement Program
Taxpayers can reclassify their workers as employees for future tax periods through the Voluntary Classification Settlement Program. Taxpayers must fulfill eligibility requirements, apply by filing Form 8952, Application for Voluntary Classification Settlement Program, and enter into a closing agreement with the IRS.
Self-employed individuals must file an annual tax return and pay quarterly estimated taxes. Since they do not have an employer who pays their taxes for them, they must pay self-employment tax (Social Security and Medicare tax) and income tax. If self-employed individuals work from a home office, they may take a home office deduction.
Taxpayers must report gig economy income on a tax return even if the income is part-time, temporary or side work. Remember that the companies that use gig workers must report these payments to the IRS, so it doesn’t pay to try to cheat on your taxes.