Are You Self-Employed (Independent Contractor) or an Employee?

It can be confusing to understand if you're self-employed or an employee. It's one of the most common questions we get.

This guide is here to help, we'll cover the differences in friendly, easy-to-understand language.

Let's dive in!

You're most likely self-employed if...

You're a lone wolf—also known as a freelancer, small business owner, sole proprietor, independent contractor, etc. 

You set your own hours and decide which clients/orders to take.

If you have a side hustle that you make a little income from, but it's not your primary source of income, you're also considered self-employed (for that portion of your income).

Because you are self-employed, no taxes are withheld from your income. This means you are responsible for more taxes (and often need to pay quarterly estimated taxes!).

If you’re in the United States: at tax time, you receive a 1099 form from the companies you worked at for your filing.

Also known as 

DoorDasher, Uber/Lyft driver, Instacart shopper, real estate agent, etc.

Example:

You are one of the Avengers. While you contribute to a larger purpose/organization, you decide what missions you join.

You're most likely an employee if...

Someone else at the company determines your work hours/shifts. You get paid a regular wage (either salaried or hourly) and receive employee benefits. 

Every paycheck you receive from this company has taxes withheld from it. Your employer withholds taxes from your pay stub. These taxes cover federal and state taxes, Medicare, and Social Security. There's also a chance that your employer withholds other state-specific taxes.

If you’re in the United States: at tax time, your employer will send you a W2 form for your filing.

Example:

You're Maria Hill, an employee of S.H.I.E.L.D. You are a formal part of an organization with stable, assigned projects. 

You're most likely both self-employed and an employee if...

You have a regular shift, but also work a side hustle. While you're a regular employee at an organization, you also work for a gig platform or a creative project on the side. 

If you’re in the United States: at tax time, you’ll likely receive both 1099 and W2 forms to use to file your taxes. 

And that's it! We hoped that helped you understand if you're self-employed, an employee, or both.

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If you want the official IRS information, please visit their article on the difference between an independent contractor/self-employed and employee here.

This is generalized tax information—Everlance team members are not certified tax professionals. If you need help with your specific tax situation, please reach out to your tax advisor.

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