I’ve been hearing from some folks that they’re getting offers from companies as an Independent Contractor (IC) and would like to learn more. One way that I consider them is to think of IC’s as a small business of 1 person. Here’s a handy reference that highlights some differences from the US Dept of Health & Human Services:
- Does the company control or have the right to control what the worker does and how the worker does the job? Is the worker able to determine their own schedule? Yes – IC
- Does the company control the business aspects of the worker’s job? These include arrangements like how the worker is paid, whether expenses are reimbursed, and who provides tools and supplies. Does the worker provide their own work tools and supplies? Yes – IC
- Is there a written contract or employee benefits such as a pension plan, insurance, or vacation pay? Who pays for benefits? Worker – IC
- Will the relationship continue and is the work a key aspect of the business? Are there start and stop dates in the contract? Yes – IC
What are some key items to consider when it comes to taxes? IC’s can use either their SSN or an EIN (Employer Identification Number). Your business can have an EIN, but you need to apply for one. If you eventually d
o hire an employee(s), you will need an EIN. Some additional and very useful links:
How Do I File taxes if I’m Self-Employed?
This covered more on self-employment (SE) tax and filing a 1040 Estimate Tax (if your net profit is greater than $400, you must pay SE taxes. And this article also includes a list of examples of what you can deduct from your SE income.
Another handy reference is Everything You Need to Know About 1099 Write Offs
This provides a more detailed list of examples of business and expenses that can be considered for business taxes. An approach to consider would be to take this list of categories and use it for tracking business-related expenses.