Becoming an independent contractor is one of many ways to be classified as a freelancer. By definition, an independent contractor provides work or services on a contractual basis, whereas self-employment is simply the act of making money without operating within an employee-employer relationship. A contractor is hired by a person or company to provide services under a contract. This means that independent contractors often work for limited periods according to the terms of a contract.
This can revolve around the completion of a project from start to finish or for a certain duration. The limited-time commitment means that an independent contractor is considered to be self-employed. They will be able to help you verify the difference between an independent contractor and an independent contractor and ensure that you file the return correctly. Some factors may indicate that the worker is an employee, while other factors indicate that the worker is an independent contractor.
You sign contracts with different brands and design a limited collection of garments or work for them for a certain period of time. A self-employed person, for example, can be anyone, from a doctor who provides medical services to others to a sculptor who sells his art to the public. Realtors typically work independently, but within a larger network or agency that helps process commissions in exchange for directing a sale. This includes a self-employment tax, paid in lieu of the FICA (Social Security and Medicare taxes) tax, as well as federal income tax and state income tax.
If it is not yet clear whether a worker is an employee or an independent contractor after reviewing all three categories of evidence, then Form SS-8, Determination of Worker Status for Federal Employment Tax Purposes and Income Tax Withholding, PDF, can be filed with the IRS. In addition, self-employed people do not receive employee benefits, such as health insurance, paid time off, and sick leave. This is where it gets complicated, in almost all cases, an independent contractor is self-employed, but not everyone who is self-employed is an independent contractor. This document is what describes your relationship with the independent contractor, and it is essential to stick to its parameters throughout your relationship.
Turns out there are some important differences between these two that can affect the way you work and pay taxes. In general, all independent contractors are self-employed, but not all freelancers are independent contractors. As a company that employs independent contractors, you should refer to the IRS 20-Point Checklist for Independent Contractors to ensure that you are not misclassifying employment or breaking the law. Companies often use independent contractors for services to prevent employees from being on staff for short needs Self-employment means that a person earns income by working for themselves rather than working for an employer.
