Fedex Overtime Attorney

Independent Contractors vs. Employees - How it Affects Your Tax Return

As the issues surrounding Fedex and their classification of their delivery drivers as independent contractors, there are several levels that people need to understand when analyzing this situation. One of those levels is how this classification has and will continue to affect the drivers on an individual level every April 15th. Below we'll take a look at the tax consequences of serving as an independent contractor as opposed to an employee.

Withholdings

As an employee, you no doubt understand that certain taxes are withheld from your paychecks. Many have wondered what such deductions like "FICA" are all about, but these itemizations are what your employer is taking out of your check to in essence "pre-pay" your income tax. Many employees see a tax refund at the end of the year if they own a home, withhold the proper amount from their paychecks and do not have a lot of complicated investment income to report.

If you've ever worked as an independent contractor, you also understand that there are no withholdings from your pay. In the very short term, this is a benefit, as if you make, for example, $5,000 per month as an independent contractor, that's the amount that's on your check - $5,000. However, independent contractors need to plan ahead by "self-deducting" certain amounts from their pay and saving it for their forthcoming tax liability. Those that don't, and spend their income, are the ones who get into trouble come tax time.

Costs

If you are an employee, you are probably somewhat unaware of the costs of overhead that you are helping to pay. Generally, these overhead costs are sunken into your salary, and the company that's successful will sometimes see a profit from having someone employed. For instance, the cost of your Internet access, phone usage, etc. is probably something that an employee never directly sees.

As an independent contractor, you see every single cost that can be attributed to you. You pay for your own phone, office space, Internet access, and in the case of Fedex drivers, your delivery trucks. One advantage for independent contractors in the tax context is that you do get to write off your costs and deduct them from your income on your tax return.

Overall, though independent contractors face significant stress when tax time rolls around, as it is up to them to account for every penny earned and spent in the course of their work lives. Mistakes are much more common for contractors, and these mistakes are often quite costly. If you have suffered tax consequences as a result of being classified as an independent contractor by Fedex, contact the Fedex overtime attorneys at Pulaski & Middleman today for a free initial consultation.