To determine how to treat payments you make for services rendered, you first need to know the business relationship between you and the person rendering the services. The person providing the services may be:
The key is to look at all aspects of the relationship in its entirety and take into account the extent of the right to direct and control the worker. Finally, document every factor used to arrive at that determination.
If you classify an employee as an independent contractor, and you have no reasonable basis for doing so, then you may be liable for payroll taxes for that employee (the tax relief provisions explained below do not apply). For more information, see Section 3509 of the Internal Revenue Code.
Workers who think they have been misclassified as an independent contractor by the employer may use Form 8919, Social Security and Medicare Taxes on Uncollected Wages PDF, to figure and report the employee’s share of Social Security and Medicare taxes on their compensation.
Self-employment and employment
Therefore, it is compatible to be both self-employed and employed. It is possible to be registered in the General Regime, and at the same time to be self-employed and therefore, to be registered as self-employed.
But it is not all bad news, there are a series of bonuses for those who are in this situation. The law of entrepreneurs establishes a series of benefits to pay less self-employed quota, in its article 28:
Adding these two amounts together raises the taxable base and a high tax rate can be applied. People who find themselves in this situation may consider setting up a commercial company to carry out their professional activity; this may be a more beneficial tax option.
Self-Employment Advantages and Disadvantages
The self-employment tax is a tax that consists of Social Security and Medicare taxes and is primarily intended for self-employed individuals. It is similar to the Social Security and Medicare taxes that are withheld from the pay of most wage earners.
You can calculate self-employment tax yourself using Schedule SE (Form 1040 or 1040-SR). Employers of most wage earners calculate Social Security and Medicare taxes. Also, you can deduct the employer’s share of self-employment tax when figuring your adjusted gross income. Wage earners cannot deduct Social Security and Medicare taxes.
The self-employment tax rate is 15.3%. The rate is composed of two parts: 12.4% for Social Security (insurance for the elderly, survivors and disabled) and 2.9% for Medicare (hospital insurance).
If you are receiving unemployment benefits and start an activity as a self-employed person for less than 60 months, the benefit will be suspended, and if this period is exceeded, it will be terminated.
In these cases, when you cease to be self-employed, you may request the resumption of unemployment benefits. The deadline for requesting this is 15 working days following the cessation of self-employment. In this case, the right to receive the benefit will begin on the day following the termination.
If, after the termination of self-employment, you are entitled to unemployment protection, you can choose between receiving this benefit or continuing to receive the unemployment protection that was suspended. If you choose the benefit that was suspended, the contributions that gave rise to the benefit that you did not choose will not be taken into account for a subsequent benefit.
If you are receiving the contributory unemployment benefit and you have completely and definitively ceased working, and you register as a self-employed worker, you can continue to receive the benefit that corresponds to you, while you are self-employed, for a maximum of 270 days or for the lesser time that you have left to receive, provided that you request compatibility within the non-extendable period of 15 days from the date on which the self-employment activity began.