The general rule is that an individual is an independent contractor if the payer has the right to control or direct only the outcome of the work and not what will be done and how it will be done. If you are an independent contractor, then you are self-employed. An independent contractor is a self-employed person or entity hired to perform work or provide services to another entity as a non-employee. As a result, independent contractors must pay their own Social Security and Medicare taxes.
Unfortunately, there is no exact test to determine if you are in business. The IRS and many other government agencies use the right of control test. Under this test, a worker is an employee if the hiring company has the right to direct and control the way the worker performs, both in terms of the final results and the details of when, where and how the work is performed. If the control of the contracting company is limited to accepting or rejecting the final results that the worker achieves, then that person is an independent contractor.
An independent contractor (CI) is someone who is in an independent trade or profession that provides services to the general public. It is considered that an IC can control his or her own work, not the employer. Rather, an employee's work is controlled and directed by the employer. Independent contractors provide goods or services according to the terms of a contract they have negotiated with an employer.
Independent contractors are not employees and therefore are not covered by most federal labor statutes. They are not protected from employment discrimination by Title VII, nor are they entitled to leave under the Family Medical Leave Act. Employers are not required to pay overtime to independent contractors under the Fair Labor Standards Act or provide accommodations for a contractor's disabilities under the Americans with Disabilities Act. An employer is also not responsible for the unemployment or workers' compensation benefits of an independent contractor and is not required to provide an independent contractor with a pension or other work benefits.
In addition, an employer does not have to pay labor taxes for an independent contractor. Independent contractors can perform a variety of functions involving specialized tasks beyond the scope of the customer's normal course of business. Some factors may indicate that the worker is an employee, while other factors indicate that the worker is an independent contractor. However, you should be aware that an independent contractor unit is not subject to the same privileges and protections as a regular union bargaining unit.
Becoming a contractor is an excellent option if you want greater control, flexibility and independence over your work. While an independent contractor is different from a standard employee, the exact definition of their role is not set in stone. As an independent contractor, you have the right to ask a state or federal agency to review your employment situation. This document is what describes your relationship with the independent contractor, and it is essential to stick to its parameters throughout your relationship.
The type of work or service provided may require independent contractors to work longer hours, including nights and weekends. The difference between being self-employed, for example, someone who weaves hats and occasionally sells them at Christmas fairs would not necessarily be an independent contractor, since they generally provide a good or service on a contractual basis. When working with independent contractors, you can use several simple tactics to stay away from hot water with the IRS and also make sure the job meets your needs. Both parties generally have an independent contractor agreement to govern their relationship, in contrast to private employment.
Unlike employees, who have income and other taxes (Social Security and Medicare taxes) withheld from their paychecks, independent contractors have to handle all of their own taxes. Independent contractors are self-employed; the money they earn working as independent contractors is subject to self-employment tax. . .
