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Telecommuting as an Independent Contractor
Most if not all telecommuting jobs will hire you as an independent
contractor not as an employee. It is important for you to clearly
understand the difference between being an independent contractor
and an employee. The difference can mean a big problem with the IRS!
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The definition of an independent contractor is as follows:
“Independent contractors are people whom are in business for
them selves; they earn their livelihoods from their own independent
businesses instead of depending upon an employer to earn a living”
What exactly does this mean for you in terms of finding and accepting
a telecommuting position as an independent contractor? In simplest
of terms it means that you will be responsible for your own taxes.
The company you contract with will not be withholding any state or
federal taxes when they send you a check. You are responsible for
paying your own taxes.
To avoid having a large sum due at tax time, most independent contractors
set up estimated quarterly tax payments to the IRS. It may be best
to contact an accountant in your state to find out the specific laws.
When doing your taxes it is called a 1099.
Pros to being an Independent Contractor:
When you are hired as a contractor you are able to claim your business
expenses as part of your taxes. For instance you can claim your
high-speed internet access, part of your long distance bill and
business supplies needed to perform your job.
Cons to being an Independent Contractor:
Two cons of being an independent contractor are you have no job security
and you are now responsible to pay self-employment taxes. Unlike
employees who have half of their Social Security and Medicare taxes
paid by their employers, self-employed people must pay their own
Social Security and Medicare taxes.
Most people find the pros far out weigh the cons when deciding to
work from home as an independent contractor. Just be sure to weigh
your options and check with an accountant to be sure. Finding out
you owe the IRS money would definitely not be a good thing!
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