Independent Contractor vs Employee.

In plain English

Independent contractor vs employee describes a worker's legal classification, which decides who pays which taxes and who owes which protections. The IRS looks at how much control the business has over the work: behavioral control (do they tell you how to do the job), financial control (who supplies tools, can you profit or lose), and the relationship (is it ongoing, are there benefits). Employers withhold taxes and pay half the Social Security and Medicare tax for employees, and owe them minimum wage, overtime, and unemployment coverage. For contractors, the worker pays their own self-employment tax and gets no such protections.

01Why it matters

Misclassification costs real money: a contractor pays the full 15.3% self-employment tax and gets no overtime or unemployment, so the label on your work decides thousands of dollars and your rights.

02The math, step by step

A delivery app pays Sam as an independent contractor. Sam sets his own hours and uses his own car, which points to contractor status. But if the app dictated his exact routes, hours, and pay rate with no ability to profit from his own decisions, a state labor agency might rule he was really an employee owed overtime and unemployment.

03What this is NOT

04Receipts

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