Your employer technically cannot just declare that you are now independent contractors where before you were employees without significant changes in how he treats you in the work place.
For example, if he pays you by the hour and requires that you work a set number of hours, say 8:30 to 5:00 with 30 minutes for lunch, you are being treated as an employee, NOT as an independent contractor.
If he performs annual evaluations that he uses as the basis for the payment of bonuses and pay increases, you are being treated as an employee, NOT as an independent contractor.
There is a comprehensive checklist that the IRS uses when employees challenge their "independent contractor" status. You can download the checklist from the IRS website (
Internal Revenue Service) if you wish.
Tax-wise, as an independent contractor, YOU become liable for BOTH sides of the FICA (Social Security and Medicare) taxes. On the surface, that increases your tax liability by 7.65 percent.
However, you can and should claim certain employee expenses on Schedule C that you could not realistically claim as an itemized employee business expenses. Some of these expenses can include the busines use of your cell phone, the business use of your home computer, the cost of business supplies that you paid out of pocket, and the business use of your car (though you CANNOT claim your commuting costs).
These expenses CAN reduce your income enough to offset the added FICA taxes.
There are also added writeoffs for medical insurance and the possibility of setting up a pension plan in your name.
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