What is the main distinction of workers classified as independent contractors?

What is the main distinction of workers classified as independent contractors?

• A. Entitled to overtime pay
• B. Subject to federal income tax withholding
• C. Do not have taxes withheld from pay
• D. Receive benefits from employers

Answer: (C)

Independent contractors are typically self-employed individuals who provide services to businesses or clients under a contractual agreement. One of the key distinctions of independent contractors is that they do not have taxes withheld from their pay, which includes federal income tax, Social Security, and Medicare taxes. Instead, independent contractors are responsible for paying their own taxes directly to the government, typically on a quarterly basis, through estimated tax payments. This is a fundamental difference from employees, who have various types of taxes withheld automatically from their wages by their employers. The other options highlight characteristics associated with employees rather than independent contractors. For instance, employees are entitled to overtime pay in many circumstances under the Fair Labor Standards Act, which is not generally applicable to independent contractors. Additionally, employees typically have federal income tax withheld from their pay, while independent contractors do not. Finally, employees might receive benefits such as health insurance, retirement plans, and paid leave from their employers, which independent contractors usually do not receive, as they operate as separate business entities.

Independent contractors are typically self-employed individuals who provide services to businesses or clients under a contractual agreement. One of the key distinctions of independent contractors is that they do not have taxes withheld from their pay, which includes federal income tax, Social Security, and Medicare taxes. Instead, independent contractors are responsible for paying their own taxes directly to the government, typically on a quarterly basis, through estimated tax payments. This is a fundamental difference from employees, who have various types of taxes withheld automatically from their wages by their employers.

The other options highlight characteristics associated with employees rather than independent contractors. For instance, employees are entitled to overtime pay in many circumstances under the Fair Labor Standards Act, which is not generally applicable to independent contractors. Additionally, employees typically have federal income tax withheld from their pay, while independent contractors do not. Finally, employees might receive benefits such as health insurance, retirement plans, and paid leave from their employers, which independent contractors usually do not receive, as they operate as separate business entities.