When looking for legitimate ways to make money at home or online, you will find that many opportunities will require you to work from home as an independent contractor, not an employee. Independent contractors are paid to work without having the legal status of being an employee.
While some people enjoy the freedom and satisfaction of working as an independent contractor. For others, it can be a little intimidating and/or confusing, especially if you don’t fully understand what’s involved.
Here is a quick overview to help you gain a better understanding of what it means to work from home as an independent contractor verses an employee.
When You Work from Home as an Independent Contractor, You are Working for Yourself
Which simply means:
- Taxes are not deducted from your paycheck.
- You are subject to Self -Employment Taxes.
- It’s your responsibility to keep track of and pay your Federal, State and Local taxes.
- You are not protected by employment laws like work discrimination, fair labor standards, etc.
- You are not eligible to receive benefits, such as vacation, health insurance, unemployment insurance,etc.
- If you make over $600 or more in a calendar year, your income will be reported on a Form 1099 instead of a W2.
- You are responsible for all of your expenses.
When you work as an employee, you use your social security number for tax identification purposes. As an independent contractor, you can choose to use your social security number or you use an employee identification number (EIN).
Benefits of Being an Independent Contractor
There are many great benefits when you work from home as an independent contractor:
- You can deduct the costs of working from home, and other expenses, like supplies, gas, equipment, etc., on your income taxes.
- You are your own boss.
- You decide the hours that you want work.
- You have the freedom to pick and choose the assignments and opportunities that appeal most to you.
- You can choose how, and where you want to work, for as much or little time as you want.
- You can work as little or as much as you want.
In most cases, you will be required to sign an Independent Contract Agreement. This is simply a written agreement that defines the working relationship between you and the companies you opt to work with.
In certain situations, the U.S. Department of Labor (DOL) and/or the Internal Revenue Service (IRS) may still consider you to be an employee and not an independent contractor. Each of these organizations has guidelines that can be downloaded from their websites that can help you to decide whether you should be paid as an employee or as an independent contractor.
As you can see, there are both advantages and disadvantages when you work from home as an independent contractor. While many people like myself, enjoy the freedom of being their own boss, many others prefer the security that comes with working as an employee.
Independent contractors have the freedom to accept the jobs they want to work and create their own work schedules. Whereas employees that work from home have the stability and benefit of being a regular employee.
Fortunately, there are a wide variety of work at home opportunities that allow you to work from home as an independent contractor or as an company employee. You can find work at home opportunities in areas such as:
- Customer service
- Freelance writing
- Data entry
- Graphic design and web design
- Transcription, just to name a few
If the advantages of working as an independent contractor sounds appealing to you, then with a careful tax planning strategy and a good record keeping tool, this can be a great way for you to achieve your dream of earning money from home.
If you choose to work from home as an independent contractor, you may also want to contact your tax professional or your lawyer to advise you on the legal and tax ramifications.
For tips on the best ways to keep records for tax purposes, here is a great video from the SBA: