Employee vs. independent contractor

 

Employee:

(1)    federal income tax withholding: 

                10% to 35% from paycheck; employer remits to U.S. Treasury

                IRS Form W-2

(2)    state income taxes (2015 rates):

                Delaware:       2.2% > $2,000 to 6.6% > $60,0000 of DE. wages

                Pennsylvania:  3.07% flat rate on wages

                New York:        4.0% > $0 reaching 8.82% > $1,029,250

                New Jersey:     1.4% > $0 reaching 8.97% > $500,000

(3)    City wage taxes (2015 rates):

                Wilmington:     1.25% on earned income

                Philadelphia:   3.92% flat rate on wages (residents)

                New York:        2.907% to 3.876%

(4)    Employment taxes:

                Social Security:  6.20% employee; 6.20% employer = 12.4% total

                                             up to "annual wage base" = $118,500 in 2015  

($7,049 maximum)

                Medicare:             1.45% employee; 1.45% employer =  2.9% total

                                              no limit on annual wages

                workers compensation insurance: 

      6.2% of employee's FUTA wages

(5)    Benefits:    not required, but no discrimination (based on income)

(6)    Federal Employment Law:

                           no discrimination based on sex, race, ethnic origin, age

                           minimum wage:  $7.25 per hour since 2009 

                           (state minimum wage may be higher: 

                            $7.75 in DE and $9.47  in State of Washington)

                           Family and Medical Leave Act of 1993:  12 weeks unpaid leave

                            Fair Labor Standards Act of 1938:  overtime for hourly employees

(7)    Work-Product:   produced within "scope of employment" belongs to employer

  

Independent Contractor:

(1)    federal income tax:

                 quarterly estimated taxes on IRS Form 1040-ES

                 principal files IRS Form 1099-MISC

                 taxed on profit (loss) from business based on type of entity

  reports net profits on IRS Schedule C

(2)    state income taxes:

                taxed on profit (loss) from business based on type of entity

(3)    city net profits taxes:

                taxed on profit (loss) from business based on type of entity

(4)    Employment taxes:

                depends on type of entity

(5)    Benefits:    none;  must buy own  (deductible by business)

(6)    Work-Product:    work product "within the scope" belongs to principal