Independent Contractor vs. Employee

What’s the difference between an Independent Contractor and an Employee?

If you take a look at the IRS Rules on Independent Contractors, the IRS determines whether you are an employee or independent contractor by how your work is controlled.

“The general rule is 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.”

“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.”

“If an employer-employee relationship exists (regardless of what the relationship is called), you are not an independent contractor and your earnings are generally not subject to Self-Employment Tax.”

“However, your earnings as an employee may be subject to FICA (Social Security tax and Medicare) and income tax withholding.”

“For more information on determining whether you are an independent contractor or an employee, refer to the section on Independent Contractors or Employees.”

From a practical side, Independent Contractors, do not receive the support, oversight, nor integrity checks on their work as a general rule. This is very difficult for staff in behavior services … especially someone just starting out.

While rates for independent contractors are generally higher than employees, it is because an employer must pay Social Security, Medicare, and Unemployment taxes for each employee. As an independent contractor, no taxes are paid for you and nothing is paid into your Social Security or Medicare. And you cannot receive unemployment from work as an independent contractor because you are considered self-employed.

Are you an Employee or an Independent Contractor? This link can help you determine your status.

Source: IRS Publication

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