I work at home. I’m an independent contractor, working for the same firm for the past eight years. That means that I’m not an employee and the company I work for doesn’t withhold income taxes, Social Security and Medicare taxes or unemployment tax on the wages I earn. I receive a 1099 instead of a W2.
It’s technically up to the employer to classify your work status. The IRS has a nice article online for further explanations for determining Independent Contractors vs. Employees.
The particulars of working as an independent contractor are as varied as the companies or individuals who hire them. Some might require you to sign a non-compete to keep you from working for other competitive firms in the same industry. Some cover a portion of the operating expenses for the contract worker, others don’t. Some independent contractors work in-office, others telecommute.
Back in the 80’s and 90’s my dad worked as a senior systems analyst for various companies. Instead of staying in one place, he’d contract by the job – working for one firm for two years, the next for six months and then back again. He was an independent contractor. Freelancers, ICs, consultants and free agents are also, for the most part, independent contractors.
For me, being a telecommuting independent contractor works out great. I signed a non-compete, I am responsible for my own expenses and my own taxes. I am not an employee of the firm yet the few contract workers and employees and owner are a tightly-knit, well fundtioning group of individuals in various stages of life and family and schedules. We all seem to make it work. Everyone I work with on a daily basis appreciates the accompodating work environment our company provides. We, I think, all lead well-rounded personal lives with little conflict between getting our jobs done well and keeping an even keel outside of work.
The hardest part of telecommuting as an independent contractor (for me personally) is having to keep up every aspect of having a functional office at home. Most days are good days – where computers work and back-ups happen and things run relatively well in the background. Other days, like those I’ve been having for the past couple of weeks, include outside ‘office-keeping’ duties that I’d rather not deal with. There are occassional days lost to having to repair malfunctions, shop for equipment, convert or upgrade to new programs and so on. Sometimes, on those dark days, I think it might be nice to work in an office setting where when something does go wrong I simply pick up my purse and leave my desk to go out for a nice long coffee break while some young kid comes in and fixes all my glitches for me.
As an independent contractor I also miss out on additional benefits commonly offered to employees; benefits like paid sick leave, paid vacation, 401K opportunities and so on.
But I like being my own boss and having control over my income and how I use the money until tax time. I worry at times about job security – but I think that’s a worry for both independent contractors AND employees alike!