Some people are working in an independent capacity, sometimes because contract work is the only work that can be found, and sometimes because starting a business has become cheap enough that it's now economical for people to try going it on their own.
The most important thing contractors should understand is that two separate federal taxes will be imposed on their income, and how to keep both taxes as low as possible. There's the regular tax, with its progressive tax rates. And there's the self-employment tax at a rate of 15.3%. The self-employment tax is similar to the Social Security and Medicare taxes deducted from an employee's paycheck. For employees, the employer pays half of these taxes and the employee pays the other half. Independent contractors, by contrast, pay both halves of this tax. Umbrella companies
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