Many self-employed individuals may actually qualify as common-law employees, meaning they work similarly to regular employees but under different contract terms.
According to the IRS, under common-law rules, if the company you work for can control what tasks are done and how they are completed, you may actually be considered an employee.
This is true even if you have freedom of action. What matters is that the company has the right to control the details of how the services are performed.
Reporting your self-employment income as a common-law employee could offer tax benefits, such as lowering self-employment tax and increasing refundable credits such as the child tax credit.
Read more from the IRS about Independent Contractor vs Self-Employed persons.
To report your self-employment income as common-law employee salaried income
- On the left sidebar, click the section for "Your Expat Taxes” to reveal the sub-menu.
- Click “Self-Employment/Business”.
- Delete your self-employment income entry by clicking the X above the entry:
- Click “Foreign and Other Income”.
- Check that “Foreign Employment Compensation and Other Wages” is selected and click “Save”.
- Click “Foreign Employment Compensation”.
- Enter your self-employment income.
- Keep in mind: You need to report your gross income and cannot deduct any business expenses.
Important Note
Attention! If you receive a 1099-MISC or 1099-NEC, filing as a common-law employee may trigger the IRS to audit you and your employer. Instead, you should talk to your employer to determine if you should have a W-2 instead of 1099-MISC/1099-NEC. If your employer disagrees and you are confident you should be classified as a common-law employee:
- File Form SS-8 with the IRS directly.
- In the “Feedback” section of the software (available after Checkout), request that Form 8919 be included in your Federal Tax Return in order to withhold half of your Social Security Taxes. You will need to have the MyExpatTaxes Professional plan.
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