Recently I posted on a discussion on the WAHM.com forum regarding the difference between an independent contractor (IC) and an employee. The information below is taken from my response in that forum discussion, and if you’d like to read that discussion in its entirety, you can find that here. You’ll find that this is a very long forum discussion, and is a topic that is continually being debated online by people who work at home. What I find the most interesting about this ongoing and frequent debate is that being a contracted “1099-hire,” is very common in the “brick and mortar world,” and I don’t recall reading anything or being part of any discussions in which this 1099 vs. W2 was debated the way it is for work at home jobs and actually find it somewhat confusing as to why there is so much discussion over this topic, and why it sometimes gets quite heated.
As a background, the initial post in this discussion was a question mainly focusing around IC (independent contractor) vs. employee as it related to income taxes. The discussion then covered more than just taxes, but that was the initial question.
I have been an independent contractor for many years, and yes, really dating myself here, lol, but even pre-internet and when my kids were little, I worked as a transcriptionist at home for a court reporting company, and everyone working for that company was paid monthly and given a 1099 for taxes. For the type of work I have done in the last 20 years, in SOME ways, I didn’t really notice much of a difference between IC and employee — after all, work is work, I’ve usually been given a set of responsibilities and a timeline and expected to do it, whether I’m paid as an employee or as an independent contractor. (Referring to online JOBS such as call centers or data entry or transcription.) Where I did notice a difference is there is usually more flexibility as an independent contractor, just how much flexibility can vary considerably from company to company and job to job, but I personally found the flexibility to basically be like a job perk – something that didn’t increase my pay in dollars but was worth a lot to me in other ways, and being an employee now would seem very restricting, to say the least.
I have not had a problem with being an IC with regard to taxes or keeping my own records, but if you are concerned and want to know how this will impact your specific tax situation, consult with a professional who can go over your information and give you their opinion. If you ask when it’s not tax time, they might even give you a free consultation, hoping to get your business for doing your taxes. If nothing else, it may be worth it for the peace of mind if you are concerned about taxes, and you also might be surprised and find out being an IC may actually make you more money [that is, more money that stays in your pocket] in the end.
Addendum: Really as a side note, I can never stress enough the importance of that flexibility perk. That is, for individuals in certain circumstances. Yes, for some it is just a nice perk but that’s all it is, and there are also other people who prefer to just have a schedule, know what it is, know it’s going to be the same all the time – in other words, the like a routine and the comfort of knowing this routine is going to be the same week after week. Obviously, the flexible schedule for them could actually fall under the cons, and not the pros.
However, there are some individuals that a flexible schedule can truly be as important as being able to work or not being able to work, or just make your life a hell of a lot easier. Some of the scenarios where this is often important are:
- Stay at home moms or dads with children with changing schedules or children in school. It is not uncommon for moms or dads with kids in school to want to work day time hours during the school year and then when summer break comes (and other breaks during the year), they can easily change to working evenings and weekends, or work around available child care. Anyone with a child in school is also very aware of the fact that in most school districts, there is usually not even a single month on the school calendar that does not have a minimum of one day off, often more. Flexible work schedule can allow a mom or dad to schedule work around that school calendar.
- Working a second job. Anyone looking for additional income will appreciate a flexible schedule to ensure that they can work around their “day job.” If your “day job” happens to be a job with a changing schedule, having to travel, etc., then the flexible schedule perk becomes even more important. It is not uncommon for the companies offering the flexible schedule to give you a minimum/maximum number of hours you can work, for people working a second job, this can also give them more freedom, working more or less depending on your desires or possibly your main career/job is seasonal, or is a job such as a teacher, with periods of time off that you may be able and even desire or need to work more hours at your second job.
- Individuals with Disabilities or Chronic Illness. Flexible schedule can be of benefit in this situation for a number of reasons. Accommodate medical appointments and/or treatment schedules, as well as the possible need for time off after the appointment or treatment. Some people with illness or physical challenges may require frequent breaks, and you can schedule yourself accordingly. Others may have certain times of the day when that is better for them to work, they are less tired or stronger, etc., or perhaps need to schedule work according to medication schedules. I have known individuals with physical challenges that find it easiest to work as many hours as they can in a day, and then take 2-3 days off after that day to rest or simply to not have to push themselves as much, and others who cannot work long shifts and need to schedule short, frequent shifts throughout the week.
- Caretakers. A person taking care of an elderly relative or spouse, or a relative or spouse who is disabled or ill, may need or desire to supplement their income or enjoy working at a job and interacting with other people, and they may need to schedule their work hours around the schedule of the one they are taking care of.
These are just a few of the scenarios where this flexible schedule can really be considered extremely valuable. So if you are looking at the IC/employee pros and cons, definitely take this into consideration, and mention this to the professionals that you are seeking opinions from for tax considerations, so they have the whole story to review before giving their recommendation.
Lastly, remember to take your individual personality into account. If you are a routine-type person who loves regular schedules and knowing what your plan for the day is and that it will remain that way day after day, no surprises, then definitely take your traits and preferences into account.
You do have options for both types of employment status in the work at home job market, so there is no need to add additional stress when you don’t have to! If you will be stressed wondering what your schedule is going to be like (and the number of hours you will be working), then by all means, you are more than likely going to be happier with employee status (which is usually not a flexible schedule). However, if you fit any of the circumstances above or other reasons why the ability to change your schedule around from week to week is going to make your life easier – then add that as a criteria to your job search preferences as you are researching jobs and companies to work for.
Do you have any opinion or experience in which being either an independent contractor or employee made a difference for you – taxes, schedule, or for any other reason? If so, please add your comments below, we’d love to hear from you!
Good luck in your job search and wishing you much success and happiness in the hours you spend earning your income at home!