Many employers try to save money on taxes and escape liability under employment laws by getting employees to sign Independent Contractor Agreements. There are some advantages to being an independent contractor, but most people labeled as contractors are really employees. Here are the top 11 things you need to know before (or even after) you sign an Independent Contractor Agreement:
1. Intellectual property. If you are creating art, written work, computer programs or other creative works, then it may be an advantage to you to be an independent contractor. Generally, you own the copyright to works created as a contractor. However, be very careful when you sign an agreement. If the contract says the work you are creating belongs to the company, you are probably giving up one of the main advantages to being a contractor.
2. Taxes. As a contractor, you’ll pay both halves of your Social Security and Medicare taxes. If you’re an employee, the employer pays half. This is a big chunk of pay to give up, so be sure you’re really a contractor before you sign. The good news is that the IRS takes a dim view of employees misclassified as contractors. There’s even a form to fill out if you think you’re misclassified, by which you might be able to get your employer to pay what they owe.