A community of 30,000 US Transcriptionist serving Medical Transcription Industry

confusion - ep

Posted: Apr 05, 2013

I may be a total dunce about this but can somebody out there explain to me what the difference(s) are between employee, IC and statutory employee. I see all of these postings and am not sure what to think.

in a nutshell - MTMT

[ In Reply To ..]
As an employee, you are generally offered benefits, they take care of deducting taxes from your pay, and you are required to adhere to a set schedule. They usually provide the equipment (computer, foot pedal, etc) that you need to do your job. It's like being an employee at any other company except you do it from home.

As an IC, you are supposed to be able to set your own schedule. You use your own computer. They don't take taxes out, so you'll need to figure out how much to set aside each week to pay them yourself. Also be aware that as an IC, you pay ALL the taxes (employers pick up half of your FICA - as an IC you pay the whole amount yourself). You also have to find your own health insurance.

Statutory is sort of a blend of the two. I was a statutory employee for awhile, and they deducted some of the taxes for me, but I still had to make my own quarterly payments on the rest.

A lot of companies use IC instead of employees because it saves them money. They don't have to pay half the FICA or pay for your health insurance. The trade-off is that you're supposedly self-employed and YOU decide when to work. But it doesn't always work out that way. They want you to stick to their schedule while avoiding paying for taxes and insurance.

I hope this helps clarify things a little bit.

expanded nutshell - ICManiac

[ In Reply To ..]
Statutory Contractor was created by the IRS for the people who fell in between employee and IC status. It is intended to be used when companies have a long ongoing relationship with an IC. The company is to cut Federal and Medicare taxes and match that, and the SC is to pay all other taxes. This is actually the best category to describe the arrangements many of us have with MTSOs. Unfortunately this category has now fallen out of favor with the IRS.

ICs and SCs working for an MTSO should theoretically be held to a window of time to complete their work (ex, 12-hour TAT), but this is not always the case.

Regardless of what category you find yourself in, you should have a contract that clearly defines the relationship you have. I have been audited for a year where I was employee, IC and SC, and it was the contracts I could show to the IRS that saved me a big headache.

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