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Misclassification of Employees
as Independent Contractors
Did you know that the misclassification of workers as independent contractors rather than employees is a fast growing problem in Rhode Island and across the country?
When employers misclassify workers:
- They avoid paying many state and federal taxes.
- They avoid providing workers compensation coverage for their employees.
- They may fail to follow wage, contractor registration or other labor laws.
- They have a competitive advantage and may underprice legitimate employers.
The Federal Government Accountability Office reports that the underpayment of unemployment, Social Security, income taxes, and workers' compensation are exceeding billions of dollars federally and millions of dollars at the state level.
Rhode Island employers must generally withhold state and federal income taxes, Social Security and Medicare taxes, and pay unemployment taxes on wages paid to employees. They must also pay Workers' Compensation premiums on the employees. |
An employee is anyone performing service for an employer who controls what will be done and how it will be done by the worker.
Independent Contractors have an independent trade, business or profession. Their services are offered to the public and they have the right to control the means and methods of how the work is performed.
If an employer retains the right to control what will be done and how it will be done, the individual is likely performing services as an employee.
If you have questions, contact Phil D'Ambra at (401) 574-8785 or email philip.dambra@tax.ri.gov.
For questions about Unemployment Insurance Fraud, click here. | For questions about Temporary Disability Insurance Fraud, click here.
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