Requirements of an Independent Contractor

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Independent contractors aren’t employees. They aren’t covered by employment agreements and they’re typically not subject to regular performance reviews. Nevertheless, they are accountable to their clients for contractually agreed services. Some key aspects of succeeding as an independent contractor include maintaining professional expertise and knowledge and establishing a good rapport with clients.

Independent Contractor Status

The first step for an independent contractor is determining if she actually is an independent contractor. The United States Internal Revenue Service is a reliable, authoritative source for independent contractors. The IRS provides guidance on how to determine independent contractor status and publishes a list of criteria independent contractors must meet. Generally speaking, independent contractors must control how they perform their services, including how they account for the work they perform. In other words, independent contractors are responsible for accounting for their own time and reporting that time to their clients.

Tax Liability and Deductions

Unlike employees, independent contractors are responsible for their own tax liability. Independent contractors determine their tax liability based on actual and projected income and managing business deductions for expenses. Most contractors remit tax payments to the IRS on a quarterly basis, and they are permitted to deduct business expenses according to IRS rules. For example, mileage reimbursement is a relatively easy-to-understand deduction that applies to workers who use their cars for business. Although an employer may reimburse employees directly for use of the employee’s personal car pursuant the IRS’ annual mileage rates, an independent contractor deducts those expenses herself.

Knowledge Base and Expertise

An independent contractor must his maintain his knowledge base and expertise. His livelihood depends on it. Membership in professional associations, subscriptions to newsletters and journals and participating in industry conferences are ways independent contractors keep abreast of business and industry trends that affect his ability to render quality services to his clients.

Client Communication

Independent contractors must – without fail – maintain good communication with their clients. A contract for services is just one form of business communication that establishes the parameters of the working relationship. However, a contract isn’t a substitute for actually communicating with the client about project status, progress and success. Status updates, periodic check-ins and regular reports are forms of communication that support a good working relationship.