These payments are not considered a salary or wages for tax purposes because the vendor doesn’t deduct taxes. For example, the payer may mail you a check, pay you via wire transfer or send payment through an ACH deposit. As an independent contractor, it’s up to you and the payer to come to an agreement on when you’ll be paid and how that transaction will take place.
How Is Independent Contractor Income Paid and Reported?Įmployees typically get paid on a consistent schedule, such as weekly, biweekly or monthly. The IRS considers someone to be an employee if the person who’s paying them to work can control what will be done by that employee and how it will be done. Incorrectly classifying an employee as an independent contractor could trigger a tax penalty. Take note: If you hire people to work for you in your business, you’ll have to decide whether to classify those people as independent contractors or employees. As long as you’re not classified as an employee, you can be considered an independent contractor. You could be considered an independent contractor if you operate as a sole proprietor, form a limited liability company, or LLC, or adopt a corporate structure. Independent contractor status can apply regardless of how your business is structured. With that guideline in mind, there are a variety of careers that offer the ability to work as an independent contractor, such as: The key characteristic of an independent contractor is retaining control of how the work they’re being paid to do is performed. Who Qualifies as an Independent Contractor?
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