what exactly is a independent contractor and how is it going to affect my taxes?

Question

i've been offered a job as an independent contractor. since i have no idea what that was i researched it and it somewhat makes since. but.... how is this status going to change my taxes and what eligible expenses (write-offs) can i expect? i'm not understanding the tax part of it.... is it good or bad? thanks in advance for your time!!

Answer 1

One of the main effects on your taxes is that you will be responsible for both halves (the employee and the employer) of your Social Security (FICA) withholding. This means you'll be paying over 15% of the first $97,500 you earn (this is the 2007 figure; it goes up every year). But, you will also be allowed certain business deductions that you would not be allowed (because you probably would not incur them) as an employee.

Answer 2

First, determine if the job is really an independent contractor job or a lazy employer. If you actually have an employer/employee relationship, they can't arbitrarily call it a contractor job.

Second, what kind of work is it? what kind of expenses do you expect to have? You can't deduct commuting, you can't deduct your cell phone (you can deduct work related calls), etc.

Third, if you owe 30% of the total to the IRS, does it still sound like they are paying you enough? Do you have the discipline not to spend the 30% and send it to the IRS? Do you really want to be in charge of your own health care and other benefits a job might give you?

Answer 3

Without more info as to what you'll be doing, it's impossible to say what your writeoffs might be - or even if it's legal for them to call you an independent contractor and not an employee. Please post more info and someone can help you more.

Your taxes will go up because you'll pay both the social security and medicare that you'd pay as an employee, plus the employer match. You won't get benefits, paid sick days, paid vacations, and won't be eligible for workers comp or unemployment comp.

Answer 4

it is both...you can pretty much right off whatever you use your cell phone internet all that stuff its bad because you pay more when tax time comes....they dont take out taxes at all in your checks...