The term “independent contractor” describes the relationship between a client and a self-employed person who provides services as an autonomous business rather than as a full-time employee. They then transfer their bottom-line Schedule C business profit to Form 1040, Schedule SE, Self-Employment Tax.
Why would a business hire you as an independent contractor instead of an employee?
Hiring an IC allows you to hire people when you need them the most. You can increase workers when it is very busy and not hire them when you do not need them. Independent Contractors work with a large amount of autonomy. They can decide how the work will be done as long as it satisfies the owner’s requirements.
Can you have an employee and an independent contractor?
However, it is inappropriate to have to have one worker selling shoes on an independent-contractor basis and another similarly situated worker doing the same thing as an employee. The same can be said for having some employee messengers and some independent-contractor messengers (or sales people, computer programmers, or what have you).
What are the consequences of treating an employee as an independent contractor?
Consequences of Treating an Employee as an Independent Contractor If you classify an employee as an independent contractor and you have no reasonable basis for doing so, you may be held liable for employment taxes for that worker (the relief provisions, discussed below, will not apply). See Internal Revenue Code section 3509 for more information.
Are there penalties for misclassifying an employee as an independent contractor?
The penalties for misclassifying employees as independent contractors can be significant. You can avoid trouble by following these tips. (For more information on hiring independent contractors, including contracts you can use to set up the terms of the relationship, get Working With Independent Contractors, by Stephen Fishman (Nolo).)
What makes a person an employee or a contractor?
Some factors may indicate that the worker is an employee, while other factors indicate that the worker is an independent contractor. There is no “magic” or set number of factors that “makes” the worker an employee or an independent contractor, and no one factor stands alone in making this determination.
