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#BUILDER CLIENT CONTRACT TEMPLATE SERIES#
Hiring an independent contractor for your business involves a series of steps and documentation necessary to maintain the freelancer-employer relationship. As someone self-employed, you also have a lower tax liability with business deductions, and there are no taxes withheld from your income when you receive payment. While independent contractors don’t get the same benefits offered to employees, you have more flexibility in your working schedule.
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There is also less paperwork involved for hiring, filing taxes for, and terminating contractors. Since you would be paying for specific work or projects to be completed periodically, you wouldn’t be committing to paying a salary when work isn’t needed. Using independent contractors also gives you more flexibility in fulfilling non-essential tasks that don’t require full-time employees. Doing so allows you to cut down on costs, as you wouldn’t be required to provide employee benefits or pay taxes for them. You can use an independent contractor agreement if you want to outsource a specific project or use a specialist. In general, there are advantages for both sides in using an independent contractor agreement. When Should I Use an Independent Contractor Agreement?īoth employers and freelancers can use an independent contractor agreement, though usually the former initiates the hiring process. As with any employment contract, independent contractors are also limited by certain clauses to protect the employer, including:Īdditionally, there is a clause written in the agreement that determines copyright ownership (on behalf of either the contractor or employer) for any original work that the independent contractor produces, along with resolution methods for any legal disputes. The agreement lays out the details of the job, from the service provided and the length of the work term, to how the independent contractor will be paid. By extension, it distinguishes the independent contractor from an employee of the business for legal and tax purposes. What is an Independent Contractor Agreement?Īn independent contractor agreement is a document that an employer uses to hire a freelancer for a specific job. They must fill out a W9 form to file taxes, and each employer that has paid them at least $600 for their work must send them an IRS Form 1099 for that tax year. Since the IRS classifies independent contractors as self-employed workers, they’re subject to Self-Employment Tax requirements. Independent contractor status is also granted based on whether they receive employee benefits, and if the employer handles financial aspects of the contractor’s job, such as reimbursing expenses or providing supplies.
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The employer can only dictate the results of the work assigned and not the process. Generally, the IRS defines an independent contractor as someone who can control how the work will be done and what will be done. They can also be a business owner that serves the public, such as a veterinarian or a lawyer.