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The distinction between independent contractor and employee is an important one in the United States, as the costs for business owners to maintain employees are significantly higher than the costs associated with hiring independent contractors, due to federal and state requirements for employers to pay FICA (Social Security and Medicare taxes) and unemployment taxes on received income for ...
Like most employees, the taxes for an independent contractor are typically due on April 15 of each year. The independent contractor files a Form 1040, just like an employee. However, there is a ...
Employers must report the incomes of employees and independent contractors using the IRS forms W-2 and 1099, respectively.Employers pay various taxes (i.e. Social Security and Medicare taxes, unemployment taxes, etc.) on the wages of a worker that is classified as an employee.
However, such employees are more expensive to hire than independent contractors because Social Security and Medicare taxes must be paid on wages in the form of FICA tax. [2] Statutory employees pay FICA tax through their employer, and so do not pay self-employment tax; despite this, they must report expenses, income and wage. [3]
Independent contractors are self-employed individuals or freelancers operating in an independent trade, profession or business. Independent contractors are professionals hired by individuals (or ...
Many employers try to save money on taxes and escape liability under employment laws by getting employees to sign Independent Contractor Agreements. There are some advantages to being an ...
The employer's decision to terminate an employee also must be reviewed by an independent body to ensure the termination was indeed just and provide protection for employees from unfair or arbitrary termination (Pitchford, 2005). The three largest classes of just-cause employees are federal and state employees, as well as union members.
Now that we got that out of the way, let’s go over one of the major differences between being a full-time employee and an independent contractor: quarterly tax payments.
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