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RE: IRS Determination of Employee vs. Independent Contractor
I'm assuming that any work contracted using a site like Fiverr or Upwork would be exempt from this, right? Or would the people atill be cpnsidered contractors? Both sites take a cut of the payment for facilitating the transaction, but all communication is done directly between the buyer and the freelancer.
Based on my rudimentary understanding of Fiverr and Upwork (I haven't used them myself), the sites serve as a platform for businesses to hire workers to perform specific projects remotely. Likely, the worker would qualify as a contractor assuming that they control the work product, the environment that they work in, and are paid by project (not on an ongoing basis).
As a result, the worker would be subject to self-employment tax. The business would be required to issue a 1099 to the worker at the end of the year which the worker would report on Schedule C subject to self-employment taxes on Schedule SE.
This determination, however, would be dependent upon the facts and circumstances surrounding the employment relationship. They would not be exempt from FICA taxes (the worker would either play the employee's half or the entire amount).