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Employee or contractor? For workers' comp, classification matters

When you're working a seasonal or short-term job, you know you're not a full-time employee. But does your employer call you an employee or a contractor?

Some people use words like "temp" and "contractor" interchangeably to refer to the folks who are only around a workplace for a few months. But these words mean very different things when it comes to taxes - and when something goes wrong.

Over the last few years, the U.S. Department of Labor has been cracking down on employers who misclassify their workers, and Iowa and other state labor departments are backing them up. The primary target: people who are classified as independent contractors but treated like employees - and thus are out of luck when it comes to many employee rights, including workers' comp.

Under Iowa law, independent contractors are considered to be operating their own business as sole proprietors. And that means that, like other business owners, if you want workers' comp insurance, you need to buy it for yourself. If you're an independent contractor and think there's a risk of workplace injuries, you might want to look into insuring yourself, since you won't be able to rely on your employer.

But what if you're not really an independent contractor, even if your employer calls you that? Your employer could be misclassifying you, and they might get out of paying workers' compensation coverage - unless they get caught.

How does the government know if you've been misclassified?

A lot depends on the situation, but the IRS has three "common law rules" that it looks at to determine whether a worker is an independent contractor or an employee, regardless of what the employer says. In general, it's all about control.

The more the worker has control over how, where and with what tools they work, the more they look like an independent contractor. On the flip side, the more employers control how and when workers get the job done, the more workers look like employees.

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