![]() ![]() The IRS has defined the difference between an independent contractor and an employee. However, this person is considered an employee and not an independent contractor. Keep in mind that a statutory employee receives both a Form W2 and a Form 1099-MISC. Despite the number of google searches referencing the term independent contractor employee, in the eyes of the IRS and state taxing agencies, an independent contractor is not an employee in the traditional sense. But the actual negotiation of rates may depend on various factors such as market demand and client agreements.Īlso, while independent contractors can refuse work, the ability to do so may depend on the specific terms of the contract or agreement with the client.Ĭlassification Rules for 1099 Independent ContractorsĪn independent contractor is a self-employed worker. You provide your own work equipment/toolsĬoncerning negotiating setting salary/pay rates, independent contractors do have some flexibility in this regard. You negotiate and set your salary/pay rate Following is a brief overview of what being an independent contractor involves: ![]() Note that a 1099 worker is generally a nonemployee of a company. The determination of whether such a worker is a statutory employee depends on specific criteria outlined by the IRS.įor more information regarding Statutory employees. Note that these conditions do not constitute a definitive rule. The work performed for you must be the salesperson’s principal business activity. The goods must be merchandise for resale or supplies for use in the buyer’s business operation. That is if, the driver is your agent or is paid on commission.Īn individual who works at home on materials or goods you supply must be returned to you or to a person you name if you also furnish for the work to be done.Ī full-time traveling or city salesperson who works on your behalf and turns in orders to you from wholesalers, retailers, contractors, or operators of hotels, restaurants, or other similar establishments. In that case, such workers may be treated as employees by statute for specific employment tax purposes if they fall within any of the following four categories.Ī full-time insurance sales agent whose principal business activity is selling life insurance or annuity contracts, or both, for one life insurance company.Ī driver who distributes beverages (other than milk), meat, vegetable, fruit, or bakery products, or a driver that picks up and delivers laundry or dry cleaning. Suppose a worker is classified as an independent contractor under the Common Law Rules. Statutory employees receive both a W2 and a 1099-MISC. ![]() There are times that an employee will fall under the category of a statutory employee, which is, for lack of a better term, a status between an employee and an independent contractor. These individuals are self-employed.Ĭoncerning tax forms, a 1099-MISC is typically received by independent contractors statutory employees generally receive a W-2 form instead. Most individuals who qualify as independent contractors have their own trade, business, or profession. For example, you will likely provide the client with a A person who contracts to perform services for others without having the legal status of an employee is an
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