What is required for an independent contractor to maintain their tax status?

An independent contractor must have a written contract with their broker to maintain their tax status. This written agreement clarifies the nature of the working relationship, ensuring that the contractor is recognized as an independent entity rather than an employee of the broker.

Having this contract is critical because it outlines the terms of their engagement, such as the scope of work, compensation structure, and the independence of the contractor to operate in their own business. This independence is essential for tax purposes, as independent contractors are responsible for their own tax obligations, deductions, and filings, which differ significantly from the responsibilities of employees.

While having regular tax deductions by the broker or filing tax returns as a business may relate to the contractor's financial responsibilities, it is the existence of a written contract that solidifies the independent status necessary for maintaining that tax classification. Employment with a single broker would typically indicate employee status, which is not the goal for an independent contractor.