![]() Taxes are not withheld when paid to do a job, as they handle that issue themselves. They can take advantage of tax laws and loopholes to make more money and are not bound to an employer’s rules. Almost every profession allows for independent contractors to thrive. Their pay is a result of their work ethic. Independent ContractorĪn independent contractor is their own boss. Employees are subject to withholding taxes, which means taxes (local, state, and federal) are deducted before every paycheck is issued. Employees work for an employer and have no control over their upside potential (besides a raise or a promotion). Their pay is always the same and only fluctuates when given a raise. Employee EmployeeĮmployees often have an employment contract and are required to show up for work every day at a specific time. ![]() ![]() The person hiring the independent contractor benefits from the relationship as they are not required to pay for health care, 401k, and other costs as they would if the individual was employed. Because an independent contractor works for themselves, they are able to take advantage of tax laws (and pay their own taxes) that they would otherwise be incapable of doing if hired as an employee. Therefore when a job commences, it’s essentially one company working for another company with no strings attached. An independent contractor, even if it’s only one person, can act as their own company. This type of work contract between an employer and a worker can be beneficial to both parties. How Does an Independent Contractor Pay Taxes?Īn independent contractor is an individual that is hired to do a job rather than being employed. ![]()
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