1099 Contract v Employee status

Here's some financial points where you will likely be losing out compared to being an employee. Try to put some monetary values on these so you have a good idea of how hard you are being screwed.

• no longer receiving medical benefits
• no longer getting matching 401k
• no longer receiving PTO
• no longer getting paid holidays
• no longer receiving 6.2 percent social security tax contribution
• no longer receiving 1.45 percent medicare tax contribution

Beyond those things that have a direct financial impact, also keep these things in mind:

• You are no longer eligible for unemployment benefits if you are terminated or the company goes under
• You aren't covered by workers compensation insurance
• You aren't protected by many labor laws
• The max amount of untaxed income that you can contribute to your retirement plan decreases from something like $13,000 to $5,500 per year. (may not be exact numbers, but your tax liability will increase)
• You may be financially responsible for investments in tools and resources required to do your job.
• You'll have to file estimated taxes on a quarterly basis.
• Taxes will be more complicated - you might have to hire someone to help you.
• You'll have to take the time to find private health insurance.

If you decide that you are not OK with your employer attempting to reclassify you, you may choose to remind or inform them of the following:

• Simply calling you an independent contractor does not make it so in the eyes of federal and state entities. Whether a worker is an employee is a legal question determined by the economic realities of the working relationship between the employer and the worker, not by job title or any agreement that the parties may make.
• If the IRS or other government agency determines that a hiring firm has unintentionally mis-classified an employee as an independent contractor, it can impose fines of $50 for each form that was not filed, 1.5% of the wages plus interest accruing daily, 40% of the FICA that the employee should have paid, and 100% of the FICA that the employer should have paid.
• A responsible person (including corporate officers and employees or members or employees of a partnership) with authority over the financial affairs of the business who willfully fails to collect and pay taxes may be held personally liable for the total amount of the uncollected tax up to 100% under the provisions of the Internal Revenue Code (I.R.C.), as well as subjected to criminal prosecution.
• If the IRS suspects fraud or intentional misconduct in employee classifications (deliberately misclassifying to avoid taxes), the IRS may levy criminal penalties of $1,000 and/or 1 year in prison for failure to properly classify and withhold wages. If the IRS obtains a felony conviction against a person or company for “attempting to evade or defeat tax,” the fines are up to $100,000 ($500,000 in the case of a corporation), or imprisonment not more than 5 years, or both, together with the costs of prosecution (I.R.C. §7201).
• A responsible person (including corporate officers and employees or members or employees of a partnership) with authority over the financial affairs of the business who willfully fails to collect and pay taxes may be held personally liable for the total amount of the uncollected tax up to 100% under the provisions of the Internal Revenue Code (I.R.C.), as well as subjected to criminal prosecution.

Useful links:
NOLO- what to do if you are misclassified
Department of labor fact sheet

SOURCE