You might think that gig work is a way to avoid paying taxes on money you receive as income. This is a common misconception. While working as a driver for a ride-sharing business or offering your house as a short-term rental are jobs that do not come with the same income information as employment positions, you do not get to escape taxes when you perform gig work.
The most important first step to working with independent contractors is to understand how they differ from your employees. An independent contractor is an individual who performs services or work for your firm but also may perform similar services elsewhere. They are not employees of your nonprofit, and you are not responsible for paying their Social Security or Medicare taxes. The IRS has strict guidelines about what constitutes an independent contractor relationship and when it crosses the line into an employer–employee relationship.
Are your employees really employees, or are they actually independent contractors? It's not just semantics; the IRS makes a stark distinction. You don't generally have to withhold or pay any taxes on payments to independent contractors, as you do with employees. If you're a business owner hiring or contracting with other individuals to provide services, consider the following:
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