Independent contractor vs. Employee Tax

Independent contractor vs. Employee Tax


As a contractor, you may be wondering if you are an employee or independent contractor. This is not always an easy question to answer. In fact, there are many different categories of workers in the United States, including those who work for themselves and those who work for others. The IRS has developed two simple tests that can help determine whether someone is an independent contractor or employee:

What is an independent contractor?

An independent contractor is a self-employed individual. He or she is free to decide how, when and where he or she works, but he or she does not have the benefit of working for an employer.

Independent contractors are not covered by the employer’s liability insurance (or other benefits), so they may be liable for injuries sustained at work if they don’t provide their own insurance coverage.

What is an employee?

An employee is someone who is paid by an employer. Employees have a contract with their employers, which sets out what they are expected to do and how much they will be paid for it. If you work in a restaurant and make $2 per hour, that means you can’t work more than 40 hours a week (or 30 hours if you’re over age 21) unless your employer agrees otherwise.

Employees also have power over other employees at their company because they are responsible for making sure everyone follows rules set out by their boss or supervisor–for example, if there’s no lunch break during the day, then all employees must eat lunch together at once time every day between noon and 1 PM so that none of them has any excuse not to follow through!

What are the differences between independent and employee?

Independent contractor vs. employee

There are many differences between independent and employee tax requirements, but the most important is that employees are paid a salary from their employer to do the work. They have no control over what they do or when they do it, but still get paid for their time and labor.

Independent contractors on the other hand have more control over their work than employees because they set their own hours and can choose whether or not they want to work on something at all times during each week. If an individual decides not too work one day, then he/she won’t be paid anything; however, if he/she decides later down the line after doing some research online (or asking friends), then maybe he/she might get paid extra money just because he/she chose this option after thinking about it enough times!

When is the difference between an independent contractor and an employee not so clear?

The difference between an independent contractor and an employee is not always clear. There are many factors to consider when determining whether someone is an independent contractor or employee, including which state you live in, the type of work being done, how much control you have over the work being done (as well as its outcome), and how long your relationship lasts.

The IRS has issued guidelines on what factors it considers when deciding whether someone should be classified as an independent contractor or employee:

How does IRS determine whether someone is an independent contractor or employee?

The IRS uses a 20-factor test to determine whether someone is an independent contractor or employee. The factors are not weighted equally, nor do they apply to every case. The factors are not in any order and the questions about each factor can vary from case to case.

How do I file for my tax return as a contract worker or employee?

If you’re an independent contractor, you can file your income tax return on Form 1040 (or Form 1040A). If you are self-employed and have no employees, then report all of your income as an individual.

If you’re an employee working for someone else, file Form 1040 with the same information as above but instead write “See attached Schedule C” at the top of that form. Then attach a copy of Schedule C to your paper version and enter any deductions thereon.

Independent and Contractor status can be confusing.

The federal tax code defines an independent contractor as someone who provides services to another party and is not controlled by the company. The IRS considers you to be an independent contractor if your work creates a profit for yourself, or if it’s in the normal course of your business operations.

You can also be considered an employee if you don’t use any of your own equipment or tools for the job (such as when a painter uses his own brushes), or if he has no decision power over what he does on his own time.

Because there are so many different ways that people classify themselves, it often becomes confusing when trying to determine whether they are employees or contractors–and how much tax money should be withheld from their paychecks each week!


If you work as an independent contractor, you’re responsible for paying the taxes that are due on your income. If you’re an employee, there are a number of benefits to being classified as one (or have other tax obligations), and it can sometimes be easier for employers to get the right amount of tax without filing for a payroll or withholding override.

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