Do labels matter? Sometimes they do. What do you think of when you hear “freelancer”? Does your visual change when someone says they’re an “independent contractor” instead? What about “consultant”? Let’s take a look at each of them:
According to Wikipedia.org, this terms was coined back in medieval days by Sir Walter Scott “to describe a ‘medieval mercenary warrior’ or ‘free-lance.’” Just as it sounds, a lance is a weapon or a spear. In today’s world of work, the freelancer label is usually attached to a writer or an artist—a graphic designer, an illustrator, a photographer, for instance. For some, a freelancer may be a hobbyist; so that could be a downside to this label.
This is a useful and common catchall label. It usually gives the impression that the individual is an owner or operator of a micro business, sometimes with one or two employees. Outside the corporate world, this term sometimes gets confused with a type of contractor who is specifically in the construction or building industry.
Many take advantage of the vagueness of this label. This could be someone who is a lone individual or someone attached to a large consulting firm. This label is more formal. And it is most commonly associated with someone dispensing expert, professional advice. Usually, this is not a label for a practitioner of a craft.
So who cares about these labels anyway? Not the IRS.
To them, the important question is: who is your employer—in practice, regardless of the label? Yourself? A company or business? The user of your services? Based on this question the IRS has two categories of workers: employed or self-employed. For income reporting, the employee gets a W-2 form from the employer and an independent contractor receives a 1099 form from a client.
What other labels have you seen out there?