If you perform work for someone you are either an employee,
and you receive a W-2, or you are an independent contractor and receive a
1099-MISC, with an amount in box 7, nonemployee
compensation.
If you receive Form-1099-MISC, with an amount in box 7, your
are presumed to be self-employed. You do not own the company that issued the
1099-MISC, but rather have your own business, which is generally reported on
your individual tax return on a Schedule C. The advantage of a Schedule C is you
are allowed to deduct ordinary and necessary expenses from your income, the disadvantage
is that you must pay self-employment tax.
The issue if someone is an employee or independent contractor,
is very complicated and maybe something you want to check into if you feel reporting
income as an independent contractor is inappropriate, click here
for the requirements for an independent contractor.
