A worker may prefer to be classified as an employee (rather than an independent contractor) for which of the following reasons:
A)To claim unreimbursed work-related expenses as a deduction for AGI.
B)To avoid the self-employment tax.
C)To avoid the cutback adjustment on unreimbursed business entertainment expenses.
D)To avoid the 2%-of-AGI floor on unreimbursed work-related expenses.
E)None of these.

Question

Quizplus · Accepted Answer

Independent contractors are responsible for paying the self-employment tax, which is both the employer and employee portion of Social Security and Medicare taxes. Employees, on the other hand, have these taxes automatically withheld from their paychecks, and their employer pays the matching amounts. Therefore, a worker would prefer to be classified as an employee to avoid paying the self-employment tax. The other reasons listed may also be important to some workers, but they are not as important as avoiding the self-employment tax.

A Worker May Prefer to Be Classified as an Employee