What are the tax consequences of being an independent contractor?

**Waterfront Specialist** · 09-21-2010, 09:55 PM

Generally, employers withhold income taxes, pay Social Security and Medicare taxes, and pay unemployment tax on wages paid to an employee. However, no withholdings or taxes are taken from payments to contractors. Companies issue contractors 1099 forms, but send W-4s to employees. Copies of both are sent to the IRS.
If an employer incorrectly classifies an employee as an independent contractor, the employer may be answerable in an audit or to legal claims brought by the worker.

Thanks for...

**Jonathan Radford** · 09-29-2010, 01:04 PM

The independent contractor is responsible for filing his own taxes, much like any other vendor relationship. They may file as a private individual or treat it as a business (LLC, S-corp, etc.).

**mjtent** · 10-01-2010, 09:33 PM

Jon is right. There is no major problem with being an independent contractor. It is just that it have to do its own taxing and some legal issues. But it can hire someone to do it for him.