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 women to clearly understand the difference between being an independent contractor and an employee. Not understanding 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 who 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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