I’ve heard independent contractors aren’t covered under worker’s compensation. How do I know if I’m an independent contractor?
Independent contractors are self-employed workers who own and run their own business. This necessarily means you don’t secure income from anyone other than your clients, or that no other boss-like figure awards you an income. An independent contractor may be called or self-christened a consultant, a freelancer, self-employed, an entrepreneur, or a business owner. Independent contractors will work for many different clients, and may even specialize in jobs that require a high level of expertise.
Many are attracted to the special perks that follow self-employment, such as a self-determined schedule, a self-determined pay, increased business deductions, and the fact that no federal or state tax is withheld from your pay. However a number of heavy responsibilities follows these perks.
Who Determines if you are an Independent Contractor?
Each client you obtain or hiring firm you work with determines whether or not you will be classified as an independent contractor or an employee. However, you must choose correctly to the best of your ability, as the IRS, state worker’s compensation programs and unemployment programs are all likely to review your classification.
The IRS collects more money from employees from independent contractors, so typically it favors classifying people as employees when it can. The IRS makes this determination according to many different factors, but they will be more likely to put you into the category of independent contractor if you fit within the following conditions:
- if you will profit or suffer loss from the business activity
- if you determine your own hours
- if you purchase your own equipment and facility
- if you have paid assistants
- if you pay all your business expenses
- if you are paid by each project you do for a client
- if you are working for more than one client or firm at one time
- if you are responsible for the tools you use for the job
However, if you are labeled an independent contractor, the downside is you are unable to collect worker’s compensation. In order to be eligible for worker’s compensation, you must meet 3 general requirements: your employer must be covered with worker’s compensation insurance, you must be an employee, and your injury must be work related.
If you think you have been incorrectly classified as an independent contractor, and you think you may have wrongfully been denied worker’s compensation benefits, you should consult with an attorney.
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