How do you know if you are an independent contractor or an employee? Does what the person you work for determine what you are called? Generally, they have the upper hand; however, a court has the final say. So what will a court look at to determine what you should be called and what that means for your income/taxes?
– Are you restricted to certain working hours or you risk losing your job? If so, then you are an employee. When an employer controls when your work, they consider you an employee. On the other hand, if you can come and go as you please, working when you see fit, then you are likely an independent contractor.
– Do you need to ask for time off or do you tell the person you work for when you are unavailable? If you must get your time off approved, you are considered an employee. If you tell the person you work for that you are unavailable between such and such dates, then you operate as an independent contractor.
– Who does the equipment you use belong to? If you purchased it yourself or use your own equipment that you already owned, you operate as an independent contractor. On the other hand, if you use your employer’s property and equipment, you are generally an employee.
– Were you hired to work on a specific job that has an ending date? This is usually a sign of an independent contractor. Employees are hired for an indefinite period of time and not for one specific project, unless it is a long-term project without a finite end in sight.
It is important to differentiate between being an independent contractor and employee. Independent contractors are responsible for all of the tax liability as opposed to an employee who only pays his portion of the taxes, while the employer pays the other half. In addition, you have certain rights as an employee that you do not have when you operate as a contractor. If you are unsure about your status, talk to the person you work for before beginning work to ensure that you know what you are entitled to and what to expect at the end of the year. No one wants to find out come April 15 that they owe a large amount of taxes because they were never considered an employee or finding out at the end of a project that their employment is over.