Fifth in a series.
Businesses today are increasing their use of independent contractors to do jobs that were once handled by employees. Those who are moving from being an employee to being a contractor see an increase in the portion of their income that goes to taxes.
"If you’re an independent contractor, you’re now paying all the taxes, federal and social security," said Bill Brunson, IRS spokesman. "If you are a common-law employee, you’re paying a portion of the social security tax and the federal income tax.”
A company pays a portion of a worker's Social Security and Medicare taxes. But that same company does not have to pay that portion of the contractor's taxes, because they are the responsibility of the contractor.
“There’s a form, SS-8, you can file with the Internal Revenue Service," Brunson said. "It goes over the individual, specific items that indicate you’re not an independent contractor, but a common-law employee.”
Check back for more tax tips as the deadline to file draws closer. Next week, Brunson will talk about how taxes are different for people who are classified as independent contractors by their employer.