Which statement best describes an independent contractor?

Which statement best describes an independent contractor?

• A. Is considered self-employed for tax purposes
• B. Receives tax withholdings from their employer
• C. Works only for one employer
• D. Is automatically eligible for employee benefits

Answer: (A)

Independent contractors are considered self-employed for tax purposes. This means they don’t have tax withheld by an employer; instead they handle their own taxes, typically reporting income on a 1099 form and paying self-employment taxes, often through quarterly estimated payments. Because they’re not on a regular payroll, the employer does not withhold Social Security and Medicare taxes, and benefits that employees receive are not automatically provided to them. They usually control how, when, and where the work is done and may work for multiple clients rather than just one. That combination of being self-employed for tax purposes, handling their own taxes, and not automatically receiving employee benefits makes the statement about self-employment the best description.

Independent contractors are considered self-employed for tax purposes. This means they don’t have tax withheld by an employer; instead they handle their own taxes, typically reporting income on a 1099 form and paying self-employment taxes, often through quarterly estimated payments. Because they’re not on a regular payroll, the employer does not withhold Social Security and Medicare taxes, and benefits that employees receive are not automatically provided to them. They usually control how, when, and where the work is done and may work for multiple clients rather than just one. That combination of being self-employed for tax purposes, handling their own taxes, and not automatically receiving employee benefits makes the statement about self-employment the best description.