Do you want to become a dance teacher and want to know if dance instructors are considered independent contractors by IRS? If YES, i advice you read on. Doctors, dentists, veterinarians, lawyers, and many other professionals who provide independent services are classified as independent contractors by the Internal Revenue Service (IRS).
However, the category can also includes contractors, subcontractors, freelance writers, software designers, auctioneers, actors, musicians, and many others who provide independent services to the general public. Independent contractors have become increasingly prevalent because a lot more people are seeking flexibility in employment.
Table of Content
- What is an Independent Contractor?
- Examples of Dance Instructors That are Usually Independent Contractors
- Factors That Determine If a Dance Instructor Will Work as an Independent Contractor Or a Full Time Staff
- 1. The nature of work
- 2. The economic realities test
- 3. Degree of control test
- What to Do to Maintain Independent Contractor Status as a Dance Instructor
What is an Independent Contractor?
An independent contractor is usually defined as a person, business, or corporation that provides goods or services under a written contract or a verbal agreement. Independent contractors are different from employees in that independent contractors do not work regularly for an employer but work as required, depending on a contract as agreed by both parties.
Are Dance Teachers Independent Contractors?
One of the decisions that any studio owner will need to make when they open their doors is whether to classify their instructor team as employees or independent contractors. Indeed, use of the independent contractor status seems to be the default classification used by most small fitness studios.
This goes to show that dance instructors can either choose to be employees or independent contractors. So, this decision depends on the dance instructor in question. He or she can choose what status he or she wants to be known as. The independent contractor status are for instructors that want more flexibility in their business, and are very ready to stand on their own, run their business and call the shots.
According to the IRS, the determination of whether to classify a worker as an independent contractor or an employee generally comes down to a question about how much control the employer has over someone who works for them. The more control, the more likely the worker should be classified as an employee.
Teachers working as independent contractors gain flexibility over their schedules and are very likely to improve their cash flow. Studio owners add expertise and variety to class schedules as interest and enrollment warrant, by hiring independent contractors.
The owners also reduce their costs significantly, since they don’t pay Social Security, Medicare, federal or state payroll taxes, unemployment insurance, worker’s compensation, health insurance, or for vacation and sick leave, as they would with employees.
The key advantage to being an independent contractors for dance teachers is flexibility. But this is possible through part-time employment as well. When you are an independent contractors, job security and protection against unfair practices or discrimination disappear.
Health insurance, unemployment benefits, workers’ comp and the opportunity for paid leave (for illness, vacation or even jury duty) are forfeited. If injured on the job, your only recourse for lost income is to sue the studio owner/client for negligence.
You bear full responsibility for state and federal taxes—not to mention Social Security and Medicare, which are subsidized by employers, and therefore higher for the self-employed (this is known as the self-employment tax).
While you can deduct business-related expenses, keep in mind that these are primarily expenses that your employer would cover. The only real tax break that the self-employed receive is being able to put away substantially more tax-deferred money for retirement than employees can.
Examples of Dance Instructors That are Usually Independent Contractors
Here is a list of people who are commonly independent contractors at a dance studio. You should still weigh the factors above before you can call them an independent contractor.
- Zumba or specialty class instructor
- A choreographer hired for performance team
- Master class teacher
- Teachers for private lessons
- Birthday party entertainer/instructor
- Maintenance or cleaning person/company
- Voice or music lesson instructor (if they set their own time)
Factors That Determine If a Dance Instructor Will Work as an Independent Contractor Or a Full Time Staff
Just because a studio owner identifies a dance teacher as an independent contractor does not mean this definition is correct, even if it is in writing. The key determinant is how “independent” the contractor really is. Independent contractors who only work for one studio, for instance, might actually be employees—full- or part-time, depending on how the studio defines a full-time schedule (typically, anything over 32 hours a week, in a 52-week year, is considered full-time).
That being the case, these are the factors to consider to know if a dance instructor is an independent contractor.
1. The nature of work
When work done is considered integral to the business, it is more likely that the person is an employee. On the other hand, work that is temporary and non-integral may imply independent contractor status. For example, a cleaner would not be doing ‘company’ work if he or she were working for a bank.
2. The economic realities test
This test examines the dependence of the worker on the business for which he or she works. If a person gains a large portion of their salary from that business, chances are that person qualifies as an employee. The test also factors in such things as level of skill, integral nature of the work and intent of parties.
3. Degree of control test
When the hiring party controls the way work is carried out, the relationship between the parties is employer/employee. If the worker can set his or her own hours and works with little or no direction, he or she is probably an independent contractor.
What to Do to Maintain Independent Contractor Status as a Dance Instructor
To maintain independent contractor status, dance teachers should abide by the following rules:
- Do not ask for supervision or instructions on how to run your class.
- Hire and pay any assistants yourself.
- Invoice for your services using your own stationery, and keep records of payment.
- Have business cards and a business phone line as proof that your services are available to multiple studios. Offer this information to each studio for their records.
- Keep your business expenses separate from your personal expenses.
- Avoid being deemed a part-time employee by one studio and offering yourself as an independent contractor performing the same duties elsewhere. It could lead the IRS to reclassify you.
- Pay taxes quarterly. Also, if you equate independent contractor status with pocketing tax-free pay, rethink your strategy. If your client is tax compliant, and paying you more than $600 annually, they will be filing that information with the IRS, where it can be crosschecked.
Before pursuing the independent contractor route, consult your tax advisors for guidance on your state’s requirements and about how best to structure these relationships. Understand that since agencies may not share these definitions, owners may need to treat the same worker as an independent contractor for one government agency, and as an employee for another in order to be in compliance.
If the studio, for instance, withholds federal taxes as though the dance teacher were an employee, but not state taxes, the dance teacher should be sure to pay the estimated taxes due to the state. For the dance teacher, the main responsibility is making sure taxes are being paid on time.
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