Worker Classification: Are You a Freelancer or an Employee?

The distinction between freelancer and employee is critical, affecting your taxes, benefits, and legal protections. Here’s how to determine your status and what it means for your finances.

Key Differences

1. Freelancers (Independent Contractors)

   • Receive 1099 forms for income.

   • Responsible for self-employment taxes.

   • Typically have more flexibility and control over work.
     

2. Employees

   • Receive W-2 forms with taxes withheld.

   • Eligible for benefits like health insurance and retirement plans.
     

Mike works part-time for a tech company through a gig platform. Initially misclassified as a contractor, he missed out on employer-provided benefits. After challenging his status, he was reclassified as an employee and gained access to healthcare and paid time off.

Resolving Misclassification Issues

• File IRS Form SS-8 to request a determination of your worker status.

• Understand state labor laws, such as California’s AB 5, which sets stricter criteria for classifying contractors.

  
  

How Arc&Ledger Can Help We assist gig workers in understanding and resolving worker classification issues, ensuring compliance and fair treatment. Contact us for guidance.