Definition of Self Employed
As a general matter, you are self employed, if:
- You are in business for yourself
- You carry on a trade or business as a sole proprietor
- You carry on a trade or business as an independent contractor.
Are you an independent contractor rather than an employee?
According to the IRS, people such as lawyers, contractors, subcontractors and auctioneers who follow an independent trade, business or profession in which they offer their services to the public, are generally not employees. However, whether such people are employees or independent contractors depends on the facts in each case.
The general rule is that an individual is an independent contractor if the person for whom the services are performed, has the right to control or direct only the result of the work and not the means and methods of accomplishing the result.
Example: Vera Elm, an electrician, submitted a job estimate to a housing complex for electrical work at $16 per hour for 400 hours. She is to receive $1,280 every 2 weeks for the next 10 weeks. This is not considered payment by the hour. Even if she works more or less than 400 hours to complete the work, Vera Elm will receive $6,400. She also performs additional electrical installations under contracts with other companies that she obtained through advertisements. Vera is an independent contractor.
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