Q: Am I a freelancer or independent contractor?
A: You’re self explanatory.
In the world of working adults, even if you really do your own thing, you are probably a freelancer. If you would rather a more formal-sounding tag, then you might call yourself an independent builder. But while the gig economy grows, so too does the variety of tags for working Americans who have decided to become their own boss.
Call yourself whatever you want, but you and the 1099er next to you, and the side-hustler next to him stand under precisely the identical umbrella. You’re all self explanatory.
What it means to become self explanatory
You’re self explanatory if any of these is true:
- You run business as a sole proprietor or an independent contractor, or
- you’re in a venture that plays a trade or conducts business, or
- you’re in business for yourself (such as a part-time company)
Independent contractors and freelancers
If you are an independent contractor or freelancer, you also may sign a contract with the individual or company requesting your services or expertise. This contract will probably detail the scope of the work to be performed and the payment that will accompany.
You are an independent contractor or freelancer when the following is true:
- You own a company or you supply an agency (your specialty) to some other businesses as decided by a contract or verbal agreement
- you’re not considered a worker
- you receive no advantages
- the company for whom you supply an agency does not withhold taxes from the pay
As an independent contractor or freelancer, your work might be sporadic since it is project-based. It comes in waves. In between work, you could come across a dry spell, where no work can be obtained (as an instance, if your work is seasonal). This is what sets you apart from, say, a permanent employee with a designated work place, receives regular paychecks, gets his or her taxes withheld, and has sick and benefits time.
Bottom line:If you are an independent contractor or freelancer, you are self-employed.
Self-employed in a gig economy
Since contract or freelance work is on-demand or as-needed, your assignment might last fourteen days or 18 months. The amount of hours each day might be put, or they could vary. The appeal will be your own boss–that is, choosing the projects to operate on, the people with whom you are working, and strengthening your own agenda.
Some examples of employees who opt to go unmarried are authors, editors, and website/graphic designers, construction workers, photographers, rideshare drivers, realtors, and musicians– much accountants, lawyers, and physicians. The list continues to grow.
Does it matter?
Your work status–if you are a permanent employee or self-employed–affects the way you do your earnings. For instance, a freelancer is going to receive a 1099 instead of a W-2 at the end of January. A freelancer will pay his or her own income taxation and self-employment tax because not one of these sums are withheld from paychecks during the year.
As the gig economy grows, and the work force transforms, reporting your income accurately is more important than ever before. Choose at TaxSlayer, where accuracy is ensured.