Taxation: Independent Contractors FAQs

Are you an employee or an independent contractor? It's important to know the answer since it'll affect how you pay your taxes. The Internal Revenue Service (IRS) offers guidelines to help you determine the difference. If you're an independent contractor, you'll have more responsibilities when it comes to your taxes. Here are some frequently asked questions about taxes for independent contractors.


Q: How do I know if I'm an employee or an independent contractor?

  • It depends on your relationship with the business. Factors of control and independence will be considered. All relevant evidence will fall into three categories: Behavioral Control, Financial Control and the Relationship of the Parties.


Q: What factors fall into the behavioral control category?

  • Any factor that shows whether the company you're working for controls what you do and how you do it. In addition, any factor that shows the company has the right to control your work, regardless of whether it does or not.


Q: What factors fall into the financial control category?

  • Any factor that shows whether the financial or economic aspects of your job are controlled by the company. This can include how you're paid, whether you provide the equipment and whether your expenses are reimbursed.


Q: What factors fall into the "relationship of the parties" category?

  • Any factor that shows how you and the company view your relationship. This can include any written contracts, whether you receive employee benefits and whether your relationship is considered permanent.


Q: What do I do if I still can't determine whether I'm an employee or an independent contractor after looking at all the evidence?


Q: What happens if my company incorrectly determines that I'm an independent contractor?

  • The company may have to pay the employment taxes it failed to withhold from your paychecks. In addition, it may be liable for interest and penalties.


Q: As an independent contractor, what form do I file with the IRS to report my income?


Q: How do I pay social security and Medicare tax if I'm an independent contractor?


Q: Do I have to make quarterly estimated tax payments if I'm an independent contractor?



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