Are you an independent contractor, or a full-time employee?

Along with outsourcing, offshoring, and "right-sizing", contracting has become more popular with American business as a cost savings measure. A company can not only avoid paying their share of FICA taxes but skip on the unemployment compensation when a job has been completed. That's not to say there aren't legitimate circumstances when an independent contractor fits the bill, but the system has been abused, predictably.

I spent much of 2014 working for a tech startup company as a "1099 employee", or independent contractor. This, despite having no contract in place. What this means is that you are responsible for paying the full amount due for Social Security and Medicare expenses, including the half that would normally be covered by your employer. You also must make quarterly income tax payments rather than having them due by April of the following year.

Workers who should qualify as full-timers will often find themselves with a 1099-MISC form at the end of the year instead of a W2. But that doesn't mean you are necessarily stuck with that designation. There are tests that the IRS uses to determine how you should be classified, including:

1) Do you receive work assignments directly from the boss, or are you given a project to complete? Note - this one applies even if it is understood that they have the right to issue instructions, whether they actually do or not.

2) Who supplies the tools, workspace and supplies for you to execute the task?

3) Are you expected to work regular hours or can you perform the job on your own time as needed?

4) Are you free to work for other clients or is your time expected to be fully devoted to one employer?

5) Are you paid an hourly wage?

The IRS has a 20 point questionnaire with further tests to determine your status as described here:
http://www.accountingpartners.com/irschecklist.shtml

If you feel you have been unfairly classified as a contractor rather than a full time employee, you can submit a form SS-8, "Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding". The IRS will mail a copy to the employer for them to make their case before making a determination. That won't happen overnight, particularly this year with an understaffed IRS.

Yes, you are very likely going to damage your relationship with the outfit that gave you the work. But this is just another means for employers to profit at the expense of the people who do the work that earns their profits.