Independent Contractor as Viewed by the IRS

To the average individual, an independent contractor is one who works on his own without the oversight of an employer. In the construction industry, these talented people perform many important tasks. An electrical engineer works to ensure the safe passage of electricity into the home to run kitchen appliances, light rooms, heat water, cool or heat the air, and run a variety of other plugged in items that we rely on every day. A plumbing specialist creates a network of pipes for water to enter the house. A framer and his crew construct the structure of a home, and a host of other construction professionals hang drywall, install cabinets, build fireplaces, lay tile, hang doors, and complete all the other necessary tasks which complete the home.

The Position, Defined

An independent contractor is an individual who is in business for himself. He sets his own goals, breaks them down into objectives, and uses his skills to earn an income. In the construction industry, these individuals apply their expertise at many different job sites from single-family homes to towering apartment buildings.

Distinguished from an Employee

The independent contractor is the owner of his own separate business. As a business owner, he provides services to others on his own time table. Typically this self-employed business owner is working on several projects at once, all for different employers. The employer decides what he wants done, a time table he'd prefer, and he chooses a company to complete the project. The construction, electrical, plumbing, or other expert then plans how to complete the project based on his previous experience and education.

The Position, with Regard to the IRS

As each year goes by, the Internal Revenue Service tightens the reins on the independent contractor. In years past, the money these individuals were earning didn't always make it to the tax records, so the government decided to establish guidelines that would prevent money being passed under the table. For instance, in order to be considered a self-employed construction expert, the individual is required to obtain a license and registered with the state by passing an exam and submitting the result to the government. Government regulations have also been set up to establish a company. Every self-employed individual working as his own boss is responsible to file taxes based on the money he's earned from the construction services he performed for various home or business owners.

Each self-employed construction business owner is required to complete an annual tax return along with paying estimated quarterly taxes. They are responsible for income tax as well as self-employment tax which covers Social Security and Medicare requirements. Typically Social Security and Medicare are taken out of the employees pay check and matched by the employing agency. As an independent contractor, the sole responsibility for these taxes falls on your shoulders.