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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 ...
These taxes are generally not paid by the employer on the compensation of a worker classified as an independent contractor. Instead, the contractor is responsible for their employer's share of the taxes when paying self-employment taxes at the end of the year. [2] Classification affects whether a worker can receive unemployment benefits.
Self-employed persons sometimes declare more deductions than an ordinary employee. Travel, uniforms, computer equipment, cell phones, etc., can be deducted as legitimate business expenses. Self-employed persons report their business income or loss on Schedule C of IRS Form 1040 and calculate the self-employment tax on Schedule SE of IRS Form 1040.
In 2021, the number of self-employed workers in this country jumped to 14.9 million in the second quarter, after falling to 12.7 million a year earlier, according to a Pew Research Center report.
A contract of employment is usually defined to mean the same as a "contract of service". [1] A contract of service has historically been distinguished from a contract for services (contract for the supply of services). The differing terminology implies a dividing line between a person who is "employed" and someone who is "self-employed".
Contingent work, casual work, gig work or contract work, is an employment relationship with limited job security, payment on a piece work basis, typically part-time (typically with variable hours) that is considered non-permanent. Although there is less job security, freelancers often report incomes higher than their former traditional jobs.
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