What A Tax Professional Will Tell You That Online Programs Don’t: Part 2

Once upon a time, a gig meant a music job. Now it is the new subcontractor self-employed name that has sprung into usage.

So now you have work you have to ask yourself, am I self-employed or am I an employee and not getting taxes taken out or benefits? You are considered self-employed if you can take or leave a job, have other clients, and are independent of the “employer” in when and how you get the work completed.

How do you know?

If the employer tells you where and when to show up, what time your breaks are, has control of your duties, and provides all material to complete your job then more than likely you are the employee of the company and should be on a W2.

Now, there are some contracted positions where you may be “asked” to work during their business hours and use their platforms to accomplish the work but that in itself does not make you an employee.

The key is you can have other jobs while working for the current company or you may be able to work around your schedule and still accomplish the work requested. There is also the length of the job or contract to be considered. If it will be ongoing without an end date, then you have a strong argument to be an employee.

Reminder on tax calculations

Remember from last week’s article — that the calculations for your pay, after expenses, start at 15.3% for social security and then income tax. It’s my recommendation to make estimated payments to the federal tax and your home state four times a year based on your guessed profit.

Do you have other options?

Are there options other than filing a Schedule C Profit and Loss from Business on your 1040 individual return? Yes, and here is a quick breakdown of the entities available and what is required for each:

graphic showcasing business types

For any entity other than a sole proprietor I suggest consulting both an attorney and a licensed tax professional. Contact me for more information and if you’re ready to take the next step in turning your ‘gig’ into a business.

Next time on the blog, the 6 most important start-up expenses any entrepreneur needs!

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