Independent contractors
Oct. 14, 2009
Being an independent contractor is hard work that is often times rewarding. But for those who are working as independent contractors in Indiana, there are a few of things to keep in mind.
Unlike a full-time employer, the contractor’s client does not hold back income tax from the independent contractor’s paycheck and send it to the state. Instead, the independent contractor is required to file quarterly estimated income tax payments with the Indiana Department of Revenue on his own. The simple guideline here is that if you are required to make federal estimated payments, then more than likely you are required to make estimated payments to Indiana, too.
Anyone working or intending to work as a contractor will need to fill out a special form with the Department of Revenue indicating he is an independent contractor. In addition, he will need to pay a small filing fee and obtain a clearance from the Indiana Department of Revenue and Worker’s Compensation Board by filling out a Worker’s Compensation Clearance Certificate Application. If the application is approved by the Indiana Department of Revenue and Worker’s Compensation Board, a certificate of exemption is issued. This certificate verifies that the contractor does not owe any Indiana tax debts and is approved to work by the Worker’s Compensation Board. This certificate is valid for one year only.
To clarify, here are the steps an independent contractor will need to take to be compliant with the State of Indiana:
- Download a translated WCE-1 form. Just visit www.impuestos.in.gov/ and click “tax forms”
- Fill it out and mail the completed application to the Indiana Department of Revenue; or
- Take the completed application to any of the Indiana Department of Revenue’s district offices. For a list of district offices, visit http://www.in.gov/dor
- Keep the original copy of the certificate of exemption (if approved) and give a copy of the certificate to your clients for their records.
It is important to be as accurate as possible when filling out the Worker’s Compensation Clearance Certificate Application. Beginning Jan. 1, 2010, the Indiana Department of Revenue will have the authority to share information with the Department of Workforce Development, Department of Labor, and the Workers Compensation Board. This may be done if the individual is suspected of misclassifying himself as an independent contractor. Any information exchanged between the agencies will remain confidential.
Finally, if the independent contractor hires employees, then the he is now considered an employer. As an employer, he is required to withhold and submit the following on behalf of those employees:
- Indiana adjusted gross income tax
- Local option income taxes
- And any federal withholdings required by the Internal Revenue Service (IRS).
To find out more about withholding Indiana taxes for employees, visit the Indiana Department of Revenue’s New and Small Business Education Center at www.smallbiz.in.gov/
And for more information about what an independent contractor needs to file in Indiana, call (317) 232-2240 (press 2 for Spanish) from 8 a.m. to 4:30 p.m., Monday through Friday, or submit questions via e-mail to jevans@dor.in.gov
You may also visit the Department’s Web site for additional information at www.impuestos.in.gov/
If you have any suggestions for this blog, please e-mail those suggestions to Señora Hinojosa at feedback@dor.in.gov
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