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Contingent workers include independent contractors, freelancers, consultants, advisors or other outsourced workers hired on a per-job and non-permanent basis.
Contingent workers are individuals hired by a company to do role- or project-based work on its behalf, but not as traditional employees. They could include independent contractors, consultants, freelancers, temps, or other outsourced labor such as gig workers.
The U.S. Department of Labor defines contingent workers as independent contractors or freelancers as opposed to contracted employees. When a company hires an employee on a permanent or temporary basis, it becomes responsible for ensuring that taxes are deducted and paid for the employee.
Employees: Workers are employed directly by the company for which work is performed. Contingent workers: Workers are provided by a staffing firm to the company for which work is performed and are employees of the staffing firm.
Instead of receiving a W-2 for tax filing purposes, contract employees receive Form 1099. This is the form you submit along with Form 1040 for filing your taxes.
When it comes to contingent workers, there are three main types:Temporary contingent workers. Though these contingent workers are employed by a staffing agency, they typically work onsite at their temporary work assignments.Consultants.Independent contractors.
1099 Independent ContractorsThese contingent workers are self-employed and are not employees; therefore, companies are not responsible for the withholding, collecting or paying of taxes nor any other payments afforded full-time employees or Temporary W2 workers.
Who are contingent workers? Independent contractors, on-call workers, freelancers, contract workers, and any other type of individual hired on a per-project basis are examples of contingent staffing. In most cases, contingent workers have specialized skills, like an accountant or electrician.
For instance, contingent workers' tax liability and reporting fall under a 1099-M instead of a W-2. The worker is responsible for the employment taxes generally covered by an organization for a traditional employee.