Businesses that grow ultimately need more people to succeed. There are several pros and cons to being hired as an independent contractor.
What Are the Pros of Being an Independent Contractor?
The pros of being hired as an independent contractor include:
- Control over how a task is performed
- Control over where and when you work
- Taxes are not withheld from your paycheck
- More flexibility over hours and types of projects you take on
What Are the Cons of Being an Independent Contractor?
The cons of being hired as an independent contractors include:
- Paying for any insurance and health benefits
- Responsibility for all taxes on contracting income
- Sole responsibility for any injuries arising out of work
- Fewer protections against employment discrimination
How Are Independent Contractors Taxed Differently From Employees?
With employees, employers typically withhold state and federal taxes, as well as social security and other state or local deductions. With independent contractors, however, the employer does not withhold payroll taxes because the employer does not provide the contractor with any benefits. Instead, the contractor’s income is considered miscellaneous income when he or she pays income taxes. As such, it is important for independent contractors to keep track of their income for tax purposes.
What If an Employer Classifies Me As an Independent Contractor?
Sometimes you may be classified as an independent contractor, even though your job characteristics are more similar to an employee. If the Internal Revenue Service (IRS) discovers that a person has been misclassified, the IRS can force the employer to pay back taxes and fines as well as provide the employee with health benefits.
What Does "Sole Responsibility" Mean for Independent Contractor Purposes?
“Sole responsibility” means an independent cannot hold anyone else responsible if an injury results from his or her work. For independent contractors, this is a loss of a very valuable protection for employees, which may be worsened by the lack of employer provided insurance.
Should I Consult an Employment Attorney?
An experienced employment attorney can help you determine whether you are an independent contractor or employee, or whether you have been misclassified, and explain what rights attach to each classification. The attorney can also assist you in bringing legal action if necessary.