Worker Misclassification Issues

Question: Does a worker's reclassification affect an employer?

Answer: Reclassification of a worker's status affects both the worker and the employer. A worker classified as an independent contractor is self-employed and, therefore, pays self-employment tax instead of FICA. An employer whose workers are reclassified as employees may owe both its share and its employees' share of FICA. Such a reclassification can create a large tax liability.

Question: Is an employer penalized for failing to treat a worker consistently?

Answer: An employer who fails to timely file any return or statement, such as a Form 1099-Misc., required for consistent treatment of the worker as a nonemployee must pay an increased amount, The employer's liability doubles to 3 percent for income tax withholding and 40 percent for FICA tax withholding.

Question: May an employer collect tax due because of an employee's misclassification from the employee?

Answer: An employer's worker misclassification liability may not be collected from an employee and the employer may not offset the liability against any tax the employee has paid.