Social Security Tax Information for Contractors

Contractors are self-employed. No matter what the size of the company may be, the contractor is responsible his or her own social security tax. However, some contractors may responsible for these taxes on their employees' behalf.

Self-Employment Taxes

Small contracting businesses, especially the sole proprietorships, pay their own, self-employment taxes. According to the Internal Revenue Service, these taxes are social security and Medicare taxes for the self-employed.

Worker Classification

You may be responsible for social security and Medicare taxes on the people who work for you. Independent contractors that work for your company are responsible for their own taxes, but you must pay these taxes for employees.

Independent Contractors

Individual contractors or companies are hired as independents, meaning that they are not on the payroll of the company that hired them. Independent contractors are responsible for reporting their own income and filing their own taxes.

Trade or Business

Contractors running a part-time or full-time business or working a trade (carpentry, roofing, dry walling, etc.) that operates in order to make a profit must file self-employment taxes, according to the IRS publication "Self Employment Taxes". Actually, making a profit is not required.

The 1099

You must fill out a W-9 form for projects that brought more than $600 in income within the tax year. In January of the following year, the company or individual that paid for the project will send you a 1099 to file your taxes.

References

• IRS: Independent Contractor (Self-Employed) or Employee?
• IRS: Who Must Pay Self-Employment Tax?
• IRS: Tax Information for Small Construction Businesses