I am a subcontractor (filled out 1099), a business owner, and sole proprieter. But I work for an employer and I'm on his payroll. He doesnt take out taxes but takes out 15% of my check. For so called workma'ns comp and general liability. I'm wondering if this is fraud. As a sub contractor I'm not required to have the workman's comp and general liabilty because I'm not the actual contractor. I feel like I'm being taken advantage of and want some answers.
2 Answers from Attorneys
If you're not an employee of this employer and are in fact an independent (sub)contractor, no amounts should be deducted from your compensation for the items you've referenced, and, consequently, it would seem reasonable for you to be asking him for a satisfactory explanation as to why it's occurring.
This is a very common situation. Under Virginia law, the contractor can be responsible for paying workers' compensation to any of your employees who get hurt on his job. Therefore many contractors pass on the cost of their workers' compensation insurance premiums to their subs by charging them a percentage. This does not provide you with workers' compensation insurance coverage, however, as you are an independent contractor/sole proprietor. If you have three or more employees, you are required to have workers' compensation insurance even though you are a subcontractor. If you don't have any employees, then you might renegotiate your deal with the general contractor to relieve you of the 15% premium contribution.