How do you know if you are an independent contractor? What do you do if you are?
We got you.
Independent Contractors aren't exclusively construction contractors.
So who are independent contractors?
"People who are in an independent trade, business, or profession in which they offer their services to the general public are independent contractors." (IRS) However, it depends: Generally, an individual is an independent contractor if the payer has no right over what will be done or how it will be done only over what the result will be.
"You are not an independent contractor if you perform services that can be controlled by an employer (what will be done and how it will be done). This applies even if you are given freedom of action. What matters is that the employer has the legal right to control the details of how the services are performed." (IRS)
If you are an independent contractor, then you are self-employed
When you are self employed there are certain things you are required to do.
Get a state business license
Get a city business license
Pay quarterly sales tax
Pay estimated (quarterly) taxes- estimated taxes are federal income tax you pay quarterly instead of an employer withholding tax from your check
Earnings of a person who is working as an independent contractor are subject to self-employment tax. To find out what your tax obligations are, visit the Self-Employed Individuals Tax Center.
If your business is registered as a partnership, an LLC, any type of Corporation then it will need to be registered with the Secretary of State.
Fill out a W-9- you fill out a w-9 for the payer before starting the work
*not required but it's also a good idea to get a business banking account
Yikes, this is scary
It seems like a lot. But once you get initiated to everything it will get easier.
Paying taxes (state & federal) quarterly will help you. At the end of the year you won't be stuck with a huge tax bill. Instead you might even get a return.
Filling out the right forms, being licensed and paying taxes is just a part of being in business.
Please let us know if you need help!
Consultations are free. We are happy to chat with you if you need any guidance. We also provide services to keep those licenses up to date and those taxes paid.