Per Diem Rates from the U.S. General Services Administration
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Rates are set by fiscal year, effective October 1 each year. Find current rates in the continental United States ("CONUS Rates").
The Independent Contractor Agreement
Are You and Independent Contractor?
The key characteristic for determining a persons worker status is, control. An independent contractor controls the means and methods of carrying out her work, sets his own work schedule and also provides the necessary equipment. An employee is subject to his employer's policies and procedures and has little control over the operations of the business.
The relationship between and independent contractor and his employer is entity/client as opposed to employer/employee. An independent contractor generally has more than one client and advertises his services to the public.
The Independent Contractor Agreement
An independent contractor agreement stipulates the responsibilities and obligations of each of the parties to the contract (i.e. work to be performed, work schedule, costs to be billed, and any other terms the parties agree to). The contract must be dated and singed by all appropriate parties.
Taxes
Since an independent contractor is self-employed, he is responsible for paying his own employment taxes. This is done by making quarterly estimated tax payments. The payments cover income taxes and FICA taxes (Social Security and Medicare taxes).
Tax Returns:
An independent contractor files Schedule C (or Schedule F for farmers) to report gross receipts and expenses, and Schedule SE to report self-employment taxes. These forms are attached to Form 1040 (or Form 1040-SR).
Employees simply file Form 1040 (or Form 1040-SR) to report gross wages and taxes withheld from their pay. Form W-2 is attached to Form 1040 (or Form 1040-SR)
Form 1099-NEC:
Form 1099-MISC must be issued to each independent contractor who i s at least $600 or more during the tax year. Form 1099-MISC must be received by the contractor no later than January 31.
The IRS must receive Form 1099-MISC on or before February 28.
Legal Considerations
States have laws requiring employers to carry workers' compensation insurance to cover employees injured while at work. Independent contractors are not required to carry worker's compensation insurance for themselves.
Who Are Independent Contractors?
Independent contractors include self-employed persons who:
- Generally promote their services to the public.
- May work on a referral basis.
- Control what, when and how their work is done.
- Provide their own equipment and supplies to do their work.
- Generally have several clients/customers.
Examples of Independent contractors include, self-employed professionals such as accountants, doctors, and attorneys, and self-employed tradespersons such as, electricians, plumbers, carpenters, and house painters.