We wanted to bring you a quick summary about the differences between self-employed individuals, independent contractors, and employees. Here are the key takeaways:
• If you provide services to other businesses, you are generally considered self-employed.
• If you own a business, you must decide whether the people you hire are independent contractors or employees. This designation will determine what tax requirements both you and the individual have.
• According to the IRS, a quick way to decide if the person you’re working with is an independent contractor or an employee is to decide whether you have a say in how the work gets done. They share that “an individual is an independent contractor if the payer has the right to control or direct only the result of the work and not what will be done and how it will be done.” For example, if you hire an individual to manage your social media pages, but they work their own hours and only deliver the content to you, they’re likely an independent contractor. If you hire someone in your office to run your social media pages and you dictate when and how that work should be done, they’re likely an employee.
* This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax professional.
Tip adapted from IRS.gov