The thrill of the holiday season is beginning to thin out, and everything is quickly going back to normal, which may be a good thing for some, but not so good for others. For those of you who managed to snag a seasonal work position during the holidays, you’re likely looking forward to that holiday check. And while that might have been your “reason for the season,” your joy could turn into sorrow around tax season, if you weren’t attentive to your classification given by your seasonal temp employer.
What’s this deal about classification?
Well, if you’re classified as an employee, then it is your employer’s responsibility of withholding income and payroll taxes; these also include amounts for social security and Medicaid. But if you’re classified as a contractor, then the responsibility falls on you to pay estimated income and self-employment taxes as required by the IRS, or you could end up facing penalty charges.
Employee vs. Contractor
If you’re not quite sure which category you belonged to during the recent holiday season, here are three questions that the IRS uses to determine classification:
Who is in charge of how the job is done? (Behavioral Control)
Consider yourself an employee if the company retains the right to direct and control the worker; a dead giveaway is some sort of employee training. The employer explains the proper methods and procedures to successfully complete a given assignment. You probably were also given a handbook or manual to follow as well.
Who has significant investment in the work? (Financial Control)
Generally, a contractor isn’t reimbursed for any expenses that are needed to complete a job. Even if you factor expenses into your original work fee, you’re still considered as a contractor. Another indication can be signs of self-employed concerns such as realizing a profit or loss for the work you’ve done.
How are you and the company involved? (Party Relationship)
If you receive benefits like paid time off, insurance, or health care, you’re basically seen as an employee. However, you may not receive any benefits and still be classified as an employee. For instance, part-time employees generally don’t receive any benefits.
A sure fire way to understand your classification from the very start is to have a written contract drawn between yourself and your employer. Most jobs will request you sign an employment contract anyway; this contract should also address you by your proper classification.
If a discrepancy about your classification appears during tax season, it’s an issue that will need to be thoroughly reviewed by you, your employer, and the IRS – there’s no one determining factor. Allow yourself more time with a personal tax extension from ExpressExtension
. Within minutes, you can receive an automatic 6-month extension and get your tax information properly together. You can also e-file your personal tax extension on-the-go with our FREE
downloadable app for iOS/Android tablets.
ExpressExtension makes tax extension easy, but if you need further assistance or have any questions, our live support experts in Rock Hill, South Carolina are ready to help out. We’re available Monday through Friday from 9 a.m. to 6 p.m. EST; you can reach us at (704) 839-2321. You can also send us an email 24/7 at firstname.lastname@example.org, or chat with us live from our website.