Should I Elect to be an Independent Contractor or an Employee?

Question

I have the option of being hired as an employee or independent contractor. I am wondering if any local accountants or CPAs in the DC / DMV area (I live in DC) have any advice as to which I should choose. I am going to a direct lending originator with the agencies (Fannie Mae, Freddie Mac, & HUD), mortgage broker for financing all other financing options, and an asset manager / developer for a family office so please consider the nature of those businesses (investments in real estate, etc.) as a factor as I would assume that would have an impact on the decision. Also, not sure if there are any tax implications uniquely pertaining to DC or Maryland regarding the occupations and/or investments in Real Estate. Thanks in advance for your help.

Basit Siddiqi · Answer

@J.P. VenturaW-2 Employee - Employer provides you tools and you are normally doing the work under the guidance of the employer.

Independent contractor - Employer does not provide you tools and you are paid to perform a task that may not be under the guidance of the employer.

There is other distinctions between the two but those are the big ones.

With that said - if you have the option of choosing - I would choose independent contractor if you are going to be working from home and you can have the employer provide you additional compensation since you will have to pay self-employment taxes. I choose this option because you can potentially have a home office deduction.

There are other concerns that you may want to factor in(unemployment compensation, health care, etc).

Loni Anderson · Answer

As I read your post it's not entirely clear to me. Do you have two opportunities you're considering? Loan originator and family office asset manager? You're right they are different and as the prior answer pointed out there are rules which you are likely aware of. As far as the tax implications in the State (or DC), that may be your biggest influence on this decision. Forgive, I have no knowledge about those tax jurisdictions. It really boils down to what the cost benefit is for each option. Good luck and congratulations on your new opportunity.

Jaysen Medhurst · Answer

@J.P. Ventura, unless you don't care about healthcare, retirement, etc. I think employee is the better route.

One thing to keep in mind is that this may not really be an option. What I mean is that the Labor Dept. has pretty strict guidelines about what constitutes an employee. This does vary from field to field, and I don't claim to be an expert in employment law, but you don't just get to pick which one. If you meet the criteria for an employee, then you are one, no matter what the company says. That means you're entitled to all the benefits of an employee.

This is a little bit of a red flag to me as it suggests the employer is playing fast and loose with the rules.

Should I Elect to be an Independent Contractor or an Employee?

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