Contract Labor
- Independent Contractor vs Employee
- Who Are Independent Contractors?
- Independent Contractors and Backup Withholding
- Form 1099-MISC
- Schedule C and Independent Contractors
- Independent Contractor Agreement
More Tax Topics
- Business Structures
- Start-up Costs
- Depreciation
- Car Expenses
- Home Office Deduction
- Travel Expenses
- Hiring Workers
- Meals and Entertainment
- Retirement
- Top Tax Myths
- Per Diem Rates - IRS Publication 1542 Oct 2011 for Travel Within the Continental U.S (for employers who pay a per diem allowance to employees)
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Updated for 2011
Schedule C and Independent Contractors
Schedule C and Independent Contractors
Independent contractors file Schedule C (Instructions for Schedule C) to report their business income and expenses.
Net profit (or loss) from Schedule C is carried to Form 1040, Line 12 (2011).
If you're a sole proprietor, payments you make to independent contractors are entered on Schedule C, line 11, Contract labor.
Self-Employment Tax
Independent contractors may be subject to self-employment tax (social security and Medicare taxes) if Schedule C shows a profit of $434 or more.
The social security rate is normally 12.4%, however for 2011 the rate is 10.4% due to the temporary tax reduction. The Medicare rate remains 2.9%.
For 2011, the maximum earnings limit subject to social security tax is $106,800. There is no earnings limitation for assessing Medicare taxes.
Schedule SE, Self-Employment Tax is used to figure self-employment tax. Schedule SE and Schedule C are attached to Form 1040.
Related Links
- Who Are Independent Contractors?
- Independent Contractor or Employee?
- Control is the Key Factor
- Independent Contractors and Schedule C
- Not Sure How to Classify a Worker?
- Good Faith Misclassification of Workers
- What is Backup Withholding
- When Backup Withholding is Required for Independent Contractors
- Reporting Fees Paid to Independent Contractors
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