![]() Considering how much fuel costs these days, it's a substantial deduction. In 2023, the IRS-set mileage rate is $0.655 per mile you drive for your business. You can claim it if you're a contract delivery driver, a freelance jewelry maker traveling to trade shows and more! This deduction is one of the most common for those who drive for ridesharing platforms. Mileage or Car Expensesĭoes your work involve driving? If so, you can claim deductions for every mile you drive! There are many possible deductions, but many sole proprietors aren't aware of what they can claim.Įvery situation is different, but here's a quick breakdown of the most common write-offs gig workers can often claim. Knowing what's available is half the battle. Here's where having a tax professional from Gerstein's Tax Service comes in handy. Unlike employees, gig workers can deduct legitimate business expenses. Many gig workers experience sticker shock when they first see how much they owe!įortunately, freelancers have ways to reduce their taxable income. It can be overwhelming doing your taxes as a contractor. As a gig worker, it's entirely up to you! Common Tax Deductions Clients can only evaluate the end product and have no say in how you do it. Independent contractors have ultimate freedom. They'll also dictate how, when and where you perform your job. The business will invest in your ongoing development and evaluate how you do the work. If you're an employee of a company, you're a human resource for the organization. Who controls your work is an important element to consider. Work Behaviorįinally, we have the factor of work control. Contractors are also responsible for buying their equipment, directly controlling profits and losses from their work and requesting reimbursement for expenses. ![]() They get paid for every ride they provide. They also don't invest in work equipment, have a claim to profits and losses or get reimbursed for expenses.Ĭontractors usually get paid a flat rate per job. Furthermore, the work contract is typically over a defined period Financial Controlįinancial control refers to the exchange of money for your work and your investment in the business.Įmployees get paid hourly or annually, even if the job runs on commissions or tips. Those factors don't apply to independent contractors. As an employee, your work also contributes to the company's bottom line, and you have employment indefinitely until you and your employer separate. They receive employee benefits like health care coverage, retirement, etc. ![]() Instead, they're your clients or customers.Įmployees are part of the business. You can work with businesses as an independent contractor. You must look at three factors to determine if you're a gig worker or an employee. You must pay income and self-employment taxes.Įmployee classification can get hazy, but there's a "facts and circumstances" test to understand your situation better. As a contractor, you're responsible for all of it. The distinction matters because employees and contractors have different tax implications.Īs an employee, your company withholds some of your net pay and covers part of your tax obligation. They work for themselves, completing projects and services for another entity. Meanwhile, contractors don't work for a company at all. Your employer pays you a salary or hourly rate and may provide additional benefits as part of your compensation package. If you're an employee, you have a standard job and work as part of a company. ![]() Ultimately, that's the major difference everything boils down to in employee versus contractor classification. These terms all refer to people who work independently and not as an employee of a company. It's the same as "freelancer" and "independent contractor." You might even call yourself a "sole proprietor" when doing your taxes. The term "gig worker" is one of many monikers you might hear. But in the eyes of the IRS, there's a big difference. Work may feel like work, no matter how you do it. Understanding whether you're an employee or a gig worker sounds simple, but this distinction is important. The Difference Between an Employee and Contractor
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