question.jpgIn Federal Income Tax

How do I know if I am self-employed or an employee?

Generally, if you are maintaining your own sole proprietorship or if you are partner in a general partnership, you are considered self-employed and must pay the self-employment tax. However, the distinction between being an employee or self-employed is not always so obvious. Some typical examples include:

1. Consultants are generally considered self-employed, not employees, and must pay the self-employment tax.

2. Real estate agents are generally considered self-employed unless they have a contract with an employer which specifies that they are an employee.

3.  Babysitters who work out of their own home, dictating the services offered and how they are performed, are generally considered self-employed. However, babysitters who work at a parent’s home and per the parent’s instructions are generally considered an employee of the parent.

4. Lecturers who only lecture once in a while are not generally considered self-employed. However, lecturers who regularly seek lecturing opportunities are considered self-employed and must pay self-employment tax.

5. Writers are generally considered self-employed for the purposes of book writing or freelance writing. However, if a writer is a staff writer, for a magazine for example, they may be considered an employee.

6. Nurses are generally considered self-employed if they are directly hired by patients to provide those patients with private services. However, where nurses are hired by hospitals or doctors for a salary, they are generally considered employees.