UK Accounting Glossary
In the United States, a self-employed person is any person who earns a living from the independent pursuit of some sort of economic activity, rather than receiving wages from another person or company. The definition has some flexibility because a freelancer or independent contractor who conducts all of their business with one client would also be considered a self-employed person. Often, a self-employed person is skilled in a particular trade or offers a specialized service or product to their community. Common trades of the self-employed person might include carpentry, locksmithing, and plumbing. Writing, graphic design, and web design are among the services typically offered by a self-employed person. Indeed, the latter three occupations exemplify how the Internet has vastly expanded the range of opportunities available to those who want to become a self-employed person. Every self-employed person has to be aware, however, that income tax implications for them are more severe than for conventional employees. To illustrate, for the tax year 2009, the IRS has set taxes on the self-employed person at 15.30%, the equivalent of an employer and employee’s combined contribution to Social Security and Medicare under the FICA tax.
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This glossary post was last updated: 5th February 2020.