The idea of working as an independent contractor is extremely popular these days with small availability of jobs. Not to mention tight economic situations. Working as a contractor has many benefits, including being your own boss. You get to choose who you want to work for and get paychecks that may seem bigger than what you were getting as an employee.
However, there are some things that independent contractors should be aware of to make sure they aren’t taken advantage of. When an employer hires you as an independent contractor, they are also able to side step some important tax withholdings that could catch up with you if you’re not careful.
When you agree with a person or company to complete a specified amount of work with a contract in place outlining payment for the work, you are basically working as independent contractor. This is much different than being an employee. Contractor jobs range from small restoration projects at a client’s home, landscape maintenance, or writing an article or website content. You, as an independent contractor, do the work and will receive payment on the completion of that work.
The Difference Between Contract Work and Being an Employee
There are many differences between doing work as a contractor and being an employee. Employees often train and groom for a position while they will hire contractors for their experience and ability. Once companies hire an employee, they often receive the equipment and supplies they need to complete their job. Contractors supply their own equipment.
But the biggest difference between being an employee and a contractor is the manner in which you handle your taxes. It is a requirement for employers to withhold certain taxes such as Social Security and unemployment insurance for their employees. Not only do employers manage these withholdings, but they also carefully document it so they can provide a copy of these withholdings to their employees at the right time.
On the other hand, employers are not required to manage or withhold taxes for independent contractors. This is when it is so important that contractors are watching out for themselves. They are in charge of their own taxes and withholdings and must deal with the reporting of these taxes on their own. It can be very easy for contractors to be taken advantage of if they are not carefully tracking their income and the estimated taxes.
Contractors can avoid tax headaches by working with an accountant who has skill and experience with handling taxes for independent contractors. Hacker Accounting works with hundreds of small businesses and independent contractors. We ensure they take care of their taxes and are receiving every possible deduction. Do not risk being stepped on as a contractor or losing too much money to taxes. Call Hacker Accounting today at 602-375-5251 and find out how we can help you.