Are You an Independent Contractor?

Posted by KC Morgan Aug 13, 2008

Are you an independent contractor? The question deserves more than careful consideration - legally, the IRS wants to know. If you’re still a stranger to 1099 forms, the self employment tax and claming expenses, you need to learn what working at home means for your budget.

The status of independent contractor is not hard to define, and it usually applies to many self employed, work at home professionals. Do you earn revenue directly from clients and/or consumers? If you ever receive income that has no taxes deducted, you can consider yourself an independent contractor.

Now, what does that mean?

Working at Home…on Your Budget?

Whether you conduct your business through email or go to client’s homes or offices to perform your service, self employment is expensive by nature. You’re independent and on your own - and even though the money you receive isn’t taxed, that doesn’t mean you don’t have to eventually pay your due.

When summer breezes are blowing, April tax time is a dim memory and barely a speck on the horizon of your future. But weeks have a way of moving quickly, and soon you’ll be liable for all those taxes you didn’t pay throughout the year.

Being an Independent Contractor

If you are an independent contractor, you’ll need to offer up a portion of your income for taxes. Remember to keep records throughout the year of what you earn and what you spend, including portions of any bills or money spent on the maintenance of your office environment and equipment. Always save a portion of your earnings - because a portion of your earnings will always be due to the government. In most states, you will also need to register yourself as an independent contractor (i.e., fill out a form) and pay your self employment tax (a percentage of your earnings).