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Independent contractor
An independent contractor is a natural person, business, or corporation that provides goods or services to another entity under terms specified in a contract or within a verbal agreement. Unlike an employee, an independent contractor does not work regularly for an employer but works as and when required, during which time he or she may be subject to the Law of Agency. Independent contractors are usually paid on a freelance basis. Contractors often work through a limited company or franchise, which they themselves own, or may work through an umbrella company. In the United States, any company or organization engaged in a trade or business that pays more than $600 to an independent contractor in one year is required to report this to the Internal Revenue Service (IRS) as well as to the contractor, using Form 1099-MISC.[1][2] This form is merely a report of monies paid; independent contractors do not have income taxes withheld from their pay as regular employees do.
Independent contractor Market stall Mason Massage therapist Doctor Nurse Newspaper Carrier Personal trainer Pool Maintenance Person Private investigator Private military company Radio presenter (in radio jargon, referred to as a "swing jock") Private security Professional wrestler Professional athlete Real estate agent Sales representative Short term university instructor Stock broker Talent agent Tattoo artist Taxi Driver or limousine driver Telephone and live chat psychic Tradesman Truck Driver/Operator Tutor
Advantages
Since they are rarely tied to an employer, they are free to set their own rules of business, limited only by bargaining power. Since they usually develop a large network of clients, the loss of one or two often has a negligible effect. Many people simply like the idea of "being your own boss." Aside from materialistic benefits, many people simply enjoy not having to answer to a supervisor. As an artist/author of any tangible artwork, such as paintings, sculptures, photographs, or written works, a person is entitled to exclusive copyright ownership if they created the work as an independent contractor. If the person created such works while in the employ of another person or corporation, the rights belong to the employer (under most standard employment contracts).
Independent contractor
Disadvantages
In the United States employer misclassification of employees as "independent contractors" to avoid employment taxation and regulation is widespread.[4] An independent contractor can itself be a business with employees; however, in most cases in the United States independent contractors operate as sole a sole proprietorship or single-member limited liability company. This means the independent contractor, as a business owner, incurs its own expenses to provide the contracted service, must acquire its own equipment to perform the service, and is responsible for business filings such as income tax returns. Independent contractors are responsible for their own self-employment tax, which consists of both halves of the FICA tax amount.[5] An employee only pays the employee portion of the FICA tax. Self-employment taxes are not withheld from the earnings of independent contractors who are required to voluntarily declare and pay estimated earnings taxes [6] to the IRS, which can lead to a trap for contractors who run into financial difficulty and become tempted to put off making the required estimated tax payments. There are several monetary incentives that are guaranteed to employees in the United States, but not independent contractors. Examples include worker's compensation and unemployment insurance; however, independent contractors are allowed to make Individual Retirement Account contributions.
References
[1] [2] [3] [4] See generally 26 U.S.C. 6041 (http:/ / www. law. cornell. edu/ uscode/ 26/ 6041. html) and 26 C.F.R. sec. 1.6041-1. Sample form 1099-MISC (http:/ / www. irs. gov/ pub/ irs-pdf/ f1099msc. pdf) IRS Frequently Asked Questions about form 1099-MISC (http:/ / www. irs. gov/ faqs/ faq-kw5. html) "U.S. Cracks Down on Contractors as a Tax Dodge" (http:/ / www. nytimes. com/ 2010/ 02/ 18/ business/ 18workers. html) article by Steven Greenhouse in The New York Times February 17, 2010 [5] See definition of FICA Tax (http:/ / www. medlawplus. com/ library/ legal/ definitions/ fica. htm). [6] http:/ / www. irs. gov/ publications/ p505/ ch02. html
External links
Independent Contractor Rights (http://jobsearchtech.about.com/library/weekly/aa121800.htm) http://www.irs.gov/taxtopics/tc762.html
License
Creative Commons Attribution-Share Alike 3.0 Unported //creativecommons.org/licenses/by-sa/3.0/