Independent Contractor

Independent contractors are actually sole proprietors, but they often don't consider themselves "a real business", so we are talking about them separately.

Independent contractors usually work alone and often are paid under their own name, rather than a business name. Independent contractors are hired to accomplish a specific task - and it is up to them as to how, when, and where to do it. Independent contractors are in business form themselves, so they are responsible for their own taxes - and unless they have incorporated or formed an LLC, independent contractors are sole proprietors.

Unfortunately, the distinction between an independent contractor and an employee can easily be blurred - by either the worker or the hiring company. The IRS fines the hiring firm if the worker is actually an employee. The IRS will fine the independent contractor if taxes (including social security self-employment tax) are not paid.

Warning: Independent contractor status has nothing to do verbal or written agreements between the worker and the hiring company. You can ONLY be considered an independent contractor if you are truly in business for yourself, take business risk, and meet virtually all of the 20 IRS factors below.

Click here for criteria used by the IRS to determine independent contractor status.

Click here for "Are you an Employee?" (includes a sample contractor for services)

Click here for information about sole proprietor requirements.