In the dental field and beyond, more medical professionals are choosing to work for staffing agencies due to growing demand and the wide range of benefits offered. From...
Misclassification of workers is a widespread issue among staffing companies. This puts both the individual and clinic at risk of legal and financial consequences.
Understanding taxation laws can feel overwhelming. At Dental Dynamic Staffing, we value our employees' knowledge and understanding of their rights. In an effort to empower you with essential information, we would like to shed some light on the distinction between W-2 and 1099 classifications when working for a staffing company.
W-2 Employee Classification
As a W-2 employee, you are considered an official employee of the staffing agency. This classification entails several important rights and responsibilities.
Tax Withholding: The staffing company will withhold federal and local state income taxes, as well as Social Security and Medicare taxes from your paychecks.
Employee Benefits: You may be eligible for various employee benefits, such as health insurance, retirement plans, paid time off, and more. The specific benefits you receive will depend on your employment agreement.
Worker Protections: W-2 employees are protected by federal and local state labor laws, including minimum wage, overtime pay, and workplace safety regulations.
Employment Rights: Your employer pays for unemployment and workers’ compensation insurance. You have the right to file for unemployment benefits if your employment with the staffing company is terminated through no fault of your own and the right to file a workers’ compensation claim if you are injured at work.
1099 Independent Contractor Classification
Being classified as a 1099 independent contractor means you are considered self-employed. There are distinct characteristics associated with this classification:
Tax Responsibility: You are responsible for calculating and paying your own taxes, including federal and local state income taxes, as well as self-employment tax for Social Security and Medicare. 1099 workers are responsible for 100% of Medicare and Social Security taxes and generally pay them quarterly while W-2 employees are only responsible for 50% of those taxes and have them taken out of their paychecks automatically.
This must be taken into consideration when comparing pay rates at staffing companies because you may be facing responsibility for estimating your taxes for the following year and pre-paying those taxes on a quarterly basis!
No Employee Benefits: Independent contractors typically do not receive employee benefits, such as health insurance or retirement plans.
Contractual Agreements: Your relationship with the staffing company is based on a contract. You will may have fewer protections under labor laws. Read your agreement carefully before signing and be wary of hidden fees and deductions.
No Unemployment Benefits: Independent contractors are generally not eligible for unemployment benefits if their contract ends or workers’ compensation they are hurt at work.
How is your classification determined?
The IRS classifies workers as W-2 employees based on the following criteria:
Behavioral Control: Employers have the right to control and direct the work of employees, including how, when, and where the work is performed.
Financial Control: Employers typically provide the tools, equipment, and materials necessary for the job. Employees are not personally responsible for business expenses related to their work.
In other words, the more control the company has over where and when you work and the tools you use to do your work, the more likely it is is that the law requires you to be classified as a W-2 employee.
In nearly all states, hygienists and dental assistants should be classified as W-2 employees.
Misclassification of workers can have legal and financial consequences for both employers and employees.
What should you do if you have been misclassified?
Consult Legal and Tax Advice: If your employer insists on the misclassification or if you believe the misclassification is intentional, it's advisable to seek legal counsel and consult with a tax professional.
Report to Tax Authorities: You can report misclassification to the IRS using Form SS-8, "Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding."
File a Complaint with Labor Agencies: Depending on your jurisdiction, you may also consider filing a complaint with the U.S. Department of Labor or your state's labor agency or department. They can investigate and potentially enforce proper classification and recover any unpaid benefits or wages.
Keep Records: Maintain thorough records of your work, contracts, payments, and any communications with your employer regarding your employment status.
At Dental Dynamic Staffing, we classify all our employees as W2, meaning you are covered under labor laws as well as our malpractice insurance. It is essential to know your tax classification before signing a contract with a staffing company in order to protect yourself and your employment rights.