| Tax question: Independent consultant vs. employee?

Tax question: Independent consultant vs. employee?

jscheese asked: I work for a technology company that employs about 40 people. I have been working here since January. I work at the office on their computer, during their normal hours (for the most part). I was hired as a “temp” in January, but as they normally go through a temp agency, and I applied through word of mouth, they pay me as they would the temp agency–with nothing taken out of my check. They classify me as being paid as a consultant. However, I do not fit into the IRS’s 20point check to fit as an independent consultant for tax purposes. Under the IRS quidelines, I am an employee. And looking into this I heard I was supposed to be paying these taxes quarterly? Can anyone explain to me what steps I need to take to take care of my taxes? Jess Driveway alarm is an extremely popular item due to its ease of installation

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3 Responses to “Tax question: Independent consultant vs. employee?”

  1. PepsiLime on March 19th, 2009 8:14 pm

    If you have already looked into the IRS’s 20 point check and are an employee, you are basically caught between a rock and a hard place. You should go to the person you report to at the technology company and say that you have checked into your employment status situation, and should be treated as an employee not an independent consultant. Notice I said “should”, but don’t be surprised if you do try to convince them that you should be an employee instead of an independent consultant that they decide that they don’t need your services anymore, and find someone who isn’t as concerned that they are breaking the law as you seem to be. As far as estimates go, by being a self-employed person (what you are classified as by being an independent consultant) you are responsible for paying them quarterly (both state and federal). Both are due for the following dates, 4/15, 6/15, 9/15 and 1/15 of the following year. Federal will include the regular tax, as well as Self-Employment (SE) tax, which is 15.3% of 92.35% of your net self-employment income (what you are being paid as a consultant less your expenses). The IRS says that to avoid any underpayment penalties you can either pay 90% of your current year tax (awfully hard since you don’t know what your tax will be until the year is over) or 100% (110% if a high income person) of your prior year tax. The form you would use for federal is a 1040-est. And I have attached a link to it with instructions. I’ve also attached some information regarding self-employed persons.

    Good luck with your employer. And don’t be surprised that if you push the issue about really being an employee instead of a consultant that they decide that they don’t need you either way.

  2. HRGal on March 20th, 2009 4:12 pm

    If the assignment is going to continue and you do not have ANY idea of when it will end then in my opinion you need to correct the misclassification.
    First I would speak with your direct manager about your concerns. Second I would speak with the human resource and/or payroll department. Let them know you are concerned that you are misclassified as a independent contractor and that you would like to correct this by becoming either an employee (even a temporary / seasonal employee without medical benefits or things like that) OR being “payrolled” through a temp agency (they won’t want to do this due to cost most likely). They may balk at both options so be prepared. If they do and you want to stay there then go to,,id=98846,00.html and find out how to pay your taxes.

  3. StephenWeinstein on March 22nd, 2009 5:15 pm

    Go to, complete (but do not file) form 1040-ES. Pay particular attention to the parts relating to self-employment income. When you finish, add the amounts that should have been sent already and the amounts that should be sent now. Write one check for the total and mail it with one of the payment slips from the 1040-ES.

    Also, expect a fight in 2008 when you file a 1040 that says you were an employee and the company files a form that says you were an independent.