Billion Dollar Blueprint: About those paycheck deductions... - FOX 8 WVUE New Orleans News, Weather, Sports, Social

Billion Dollar Blueprint: About those paycheck deductions...

  • Billion Dollar Blueprint: About those paycheck deductions...More>>

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  • Billion Dollar Blueprint: Employee or independent contractor?

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  • Billion Dollar Blueprint: How we got our numbers

    Billion Dollar Blueprint: How we got our numbers

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    Estimating how much money is being lost by misclassification is not easy. Here’s how we did it.more>>

    Estimating how much money is being lost by misclassification is not easy. Here’s how we did it.

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NEW ORLEANS (WVUE) -

Every payday, you probably notice large amounts of money being sucked out of your paycheck. That's money you've worked for, going straight to the government.

Our investigation found the government is not collecting this money for many construction employees.

For a business owner, it means they're making more money but not paying their share of employees' taxes.  And for the employees, many are able to take home more money each month - but they're not paying their fair share.

Here's what it means for the average construction worker who's being classified as an independent contractor and not paying taxes.

  • First, some are not paying federal income taxes - that accounts for about 15 percent of their total take home income.
  • Add in about 4 percent for state income taxes.
  • And finally, the federal government collects 6.2 percent for FICA, or Social Security, and another 1.45 percent for Medicare.

That all equals 26.65 percent of a typical employee's income going straight to the government. 

So, for one of these workers making $35,000 a year, that should mean about $9,300 a year taken out of their income in taxes.  But our investigation has found, in many cases, that extra $9,300 - employers are saving, and the employees get to spend.

On the business owner side, they also pay 6 percent for Social Security, and 1.5 percent for Medicare.  Employers also send the government unemployment taxes, both state and federal.  All totaled, that can range anywhere from 15 to 20 percent.

So, if a business is labeling an employee an independent contractor, it means they're saving $7,000 for that $35,000-a-year worker.

For that one employee, when you combine the unpaid taxes by both sides, taxpayers could be missing out on $16,300.

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