How is the independent contractor hurt

Assignment Help Finance Basics

Reference no: EM131820021

Question: Many small businesses have to squeeze down costs any way they can just to survive. One way many businesses do this is by hiring workers as "independent contractors" rather than as regular employees. Unlike rules for regular employees, a business does not have to pay Social Security (FICA) taxes and unemployment insurance payments for independent contractors. Similarly, it does not have to withhold federal, state, or local income taxes or the employee's share of FICA taxes. The IRS has a "20 factor test" that determines whether a worker should be considered an employee or a contractor, but many businesses ignore those rules or interpret them loosely in their favor. When workers are treated as independent contractors, they do not get a W-2 form at tax time (they get a 1099 instead), they do not have any income taxes withheld, and they find themselves subject to "self-employment" taxes, by which they bear the brunt of both the employee's and the employer's shares of FICA taxes.

Requirements: 1. When a business abuses this issue, how is the independent contractor hurt?

2. If a business takes an aggressive position-that is, interprets the law in a very slanted way-is there an ethical issue involved? Who is hurt?

Reference no: EM131820021

Questions Cloud

Call results in a reservation being made : What is the probability that at least one call results in a reservation being made?

What are the main characteristics of intangible assets : What are the main characteristics of intangible assets? How are they presented in the balance sheet? How do you estimate their useful life

Injured in accident while driving an off-road vehicle : Morgan, a resident of Kentucky, is injured in an accident while driving an off-road vehicle made by Drivers Edge, Inc.,

Information from a poll of registered voters in cedar rapids : Information from a poll of registered voters in Cedar Rapids, Iowa, to assess voter support for a new school tax was the basis for the following statements

How is the independent contractor hurt : Many small businesses have to squeeze down costs any way they can just to survive. One way many businesses do this is by hiring workers.

How forecasting might help your organization in the future : Give examples of how forecasting is used in organizations to which you belong, or how forecasting might help your organization in the future.

How much would barbara include in income : Barbara's life expectancy from 2002 forward on which the payments were based is 25 years. How much would Barbara include in income

Discuss a time in your own working life where you witnessed : Discuss a time in your own working life where you witnessed fellow employees resisting or sabotaging new organizational processes.

Compare the financial reporting needs of the resource : Compare the financial reporting needs of the resource providers of government/not-for-profit organizations to the financial reporting needs of the resource

User Account

All Pages