[nabentre] Contractors Versus Employees?

[Everett Gavel]

Thanks Kane, and Brandon as well, for such 
detailed responses to Anita's question. I 
appreciate that. Sometimes it's nicer than having 
to go out to websites to find the details and read 
through tons of stuff that isn't even exactly what 
you're searching for.

Strive On!
Everett


----- original message ----- 
Going back to the prior thread that touched on 
this question:
I agree with Colleen--that Brandon's treatment of 
life as an employee
vs. life as a contractor was clear and for the 
most part accurate.  As
someone who has worked both as an employee and as 
a contractor, and
who does financial planning professionally, I wish 
to clarify one
point and to make a couple of others.

(1)  As an employee, you work for someone else in 
exchange for a
documented wage or salary.  Regardless of whether 
you are an exempt
[salary-earning] employee or a non-exempt [hourly 
wage-earning]
employee, you receive at the end of the year a 
Form W-2 Wage and Tax
Statement, a model for which is available for 
download on the IRS'
Website.  An employer withholds federal taxes in 
accordance with what
you have filled out on an IRS Form W-4, and the 
employer also deducts
from your wages, among other things, a portion of 
your pay that is set
aside for payment of one-half of what is owed on 
your behalf to the
Social Security and Medicare systems.  As a 
contractor, on the other
hand, you receive at the end of the year a Form 
1099-MISC.  You as the
self-employed owner of your services must go 
through a more
complicated scenario to figure out how much tax 
you owe, and you also
are responsible for paying more into Social 
Security and Medicare than
you would have as an employee of somebody else, 
because when you are a
contractor you must pay into these federal 
entitlement systems from
both the employer side and the employee side.  If 
you are a
contractor, if you're thinking of becoming one, 
it's a good idea to
familiarize yourself with these self-employment 
tax rules, which you
can do by reading
https://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Self-Employment-Tax-Social-Security-and-Medicare-Taxes.
I have found overall that the IRS' and the Social 
Security
Administration's Websites are very accessible to a 
blind reder.

(2)  The biggest economic difference these days 
between a full-time
employee and a contractor often comes down to 
health insurance: where
it comes from, who is responsible for paying for 
it, and how much you
as an employee or contractor is responsible for 
paying on this
benefit.  In the United States, the trend for many 
companies is to cut
down sharply on their number of employees and to 
get services
performed more and more frequently by 
self-employed contractors.  In
this way, they pass along the full responsibility 
and cost for health
insurance coverage--or for paying the penalty if 
you don't have any
health coverage--onto the worker.  This is a whole 
different topic of
discussion which I don't want to get into on this 
thread; but it is
extremely important for any of us who have 
families.  And it's not
just an either/or proposition.  Sometimes, 
employers do not pick up
health insurance for employees; other times it is 
worthwhile even if
you are an employee to look for your own 
individual coverage and to
reject participation in a group plan that the 
employer offers.  At any
rate, it's important to go to someone who knows 
what he or she is
doing in this area for advice.

(3)  Finally, if you are someone's employee, you 
have some civil
rights protections guaranteed by the Americans 
with Disabilities Act.
If you are a contractor who hires others, and if 
you earn a certain
amount of your business from selling products or 
services to the U.S.
federal government, then those whom you hire have 
some ADA protection
as well. 
http://www.dol.gov/dol/topic/disability/employeerights.htm
But if you work as an independent contractor for 
somebody else--say,
as the seller of nutraceuticals on behalf of an 
MLM or even as the
independent representative of a broker/dealer in 
the securities
business, as I do--you have almost no protection 
under the Americans
with Disabilities Act.  This is because the world 
looks at you as
being a self-employed person who can choose who 
you want to represent,
or who can choose not to represent anybody at all. 
I am not an
attorney, but from what I have read our protection 
as
contractors--such as we have any--comes from 
certain provisions of the
Rehabilitation Act of 1973, particularly Section 
504.  I'm sure a duly
licensed attorney who follows this list can 
clarify my own
understanding of this; but when making a choice 
about how you want to
interact with another company as you create a job 
or career for
yourself, it's worth taking these things into 
close consideration
first.

Warm regards,

Kane Brolin