Independent contracting in the United States
Independent Contracting in the United States
Independent contracting in the United States, also known as freelancing, is a form of self-employment where an individual provides services to different clients on a contractual basis.
Pronunciation
- Independent: /ˌɪndɪˈpɛndənt/
- Contracting: /kənˈtræktɪŋ/
Etymology
The term "independent contractor" is derived from the concept of a contractor being independent from the entity hiring them. The term "contractor" comes from the Latin word "contractus", which means "drawn together" or "contracted".
Definition
An independent contractor is a person or entity contracted to perform work for—or provide services to—another entity as a nonemployee. As a result, independent contractors must pay their own Social Security and Medicare taxes. The client does not withhold taxes from the payment, which is different from a traditional employee-employer relationship.
Related Terms
- Self-employment: The state of working for oneself rather than an employer.
- Freelancing: Working on a contract basis for a variety of companies, as opposed to working as an employee for a single company.
- Gig economy: A labor market characterized by the prevalence of short-term contracts or freelance work as opposed to permanent jobs.
- 1099-MISC: The IRS form that is used to report miscellaneous income, such as income earned as a self-employed independent contractor, during the tax year.
Legal Aspects
In the United States, independent contractors are considered to be in business for themselves. They are not considered employees, and therefore they are not covered by federal and state laws that protect employees, such as minimum wage and overtime laws. However, they have the right to control how they go about accomplishing the tasks they have been hired to do, which is not the case for employees.
Tax Implications
Independent contractors in the United States are responsible for paying their own taxes, including self-employment tax and estimated taxes. They receive a 1099-MISC form from each client who pays them $600 or more during the tax year.
External links
- Medical encyclopedia article on Independent contracting in the United States
- Wikipedia's article - Independent contracting in the United States
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