In light of pending legislation and proposed IRS rule changes, the definition of an independent contractor must be clarified to protect the freedom and flexibility you need to grow your business.

We propose that an Internet-based freelance service provider like you who satisfies all of the following tests be treated as independent contractor for Federal tax purposes. These requirements are comparable to the existing IRS treatment of “direct sellers” under Internal Revenue Code, subsection 3508. 

In Legislative Language

An “Internet-based freelance service provider” would be defined as any individual who:

1. is engaged in the trade or business of providing services to service recipients under an Internet-based marketplace for services,

2. can offer such services to multiple service recipients,

3. in the conduct of his or her trade or business, determines  whether to provide such services to a particular service recipient, the amount of services, and the time period during which such services are provided,

4. performs such services at home or other facility of his or her choosing (other than a facility of the service recipient),

5. provides all of the necessary equipment and facilities to perform such services,

6. receives for the performance of such services remuneration, substantially all of which is directly related to output (including the completion of a task) rather than to the number of hours worked, and

7. performs such services pursuant to a written contract between such person and the service recipient and such contract provides that such person will not be treated as an employee with respect to such services for Federal tax purposes.

In Plain Language

An “Internet-based freelance service provider” like you:

1. is a self-employed business owner providing services to other businesses through the Internet,

2. can offer your services to multiple businesses,

3. decides if, when, how long, and for whom you provide services,

4. decides where to work—at your home or other location not at the businesses you serve,

5. provides all of the equipment and supplies needed to offer your services,

6. is paid for the services you provide and tasks you complete not for the hours worked, and

7. have a contract with each business served that states you are not an employee of that business.

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