If you live in California and are considering being an independent contractor (IC) it is important you understand what it means. While there are distinct benefits to this employment classification, there are also some downfalls. For some workers it is a great arrangement, while for others being an employee may be the better fit.
According to the Chronicle, one of the biggest advantages of an independent contractor is you get to call the shots. You choose which projects you take, what your hours are, how many vacations you take and where you work. There is also no income ceiling. You can work as much as you want and you are not confined to salary limits. There are also tax advantages, as you can deduct your business-related expenses and no taxes are taken out of your paycheck.
KALW Local Public Radio in San Francisco warns that tax implications can also be a disadvantage. The city, and others in the state, is now imposing a city tax on independent contractors, which is separate from the IRS. Because taxes are not taken out initially, an IC must also be financially responsible so there is enough to pay taxes owed come tax season. An IC also does not receive benefits such as health insurance, workers’ compensation, vacation or sick pay, overtime pay, labor rights and unemployment benefits.
If you are considered to be an independent contractor, make sure you understand your rights. Some employers will classify you as an IC for their benefit but then treat you like an employee. If this is happening, make sure you reach out to an employment attorney.