During your Amazon Flex experience, you will likely be reminded many times that you are driving as an independent contractor, and not an employee, for Amazon. What does this mean for you?
Lack of benefits and reimbursement under Amazon Flex
Legally, as an independent contractor, Amazon is not obligated to provide reimbursement and benefits that regular employees would regularly receive. For example, unlike becoming an employee for UPS or FedEx, you are required to provide your own vehicle, pay for your own gas, your own insurance, and any other costs that you may incur during your contract. Unlike a typical employee – employer relationship where there are many rules and policies, the Amazon Flex contract is very simple – Amazon establishes a contract with you in which you agree to deliver packages as requested, and upon successful completion, Amazon provides payment for these services – but the method in which the services are rendered are fully within the drivers’ control.
It can sometimes be difficult to draw the line between an independent contractor and employee. In a general sense, both types of arrangements allow one party to provide a service to another party, and receive compensation for services rendered. One of the biggest draws for companies who hire independent contractors as opposed to employees, is that their obligations to the worker are substantially less, and this means that as a contractor, you receive fewer benefits such as unemployment insurance or workers’ compensation. Keep this in mind as you continue your Amazon Flex work and calculate your true income. You might see a solid 20 – 25 USD / hour hit your bank account – but as an independent contractor you are responsible for all other costs that you incur on your vehicle as well as other benefits you may receive in a regular full time position. So, keep this in mind when you compare an independent contractor position with that of a full employment position with benefits.
Taxes as an independent contractor
As an independent contractor, you will need to handle your income taxes differently from income taxes on regular employment income. Unlike a standard employer who will withhold taxes before sending out your paycheck, you are responsible for submitting quarterly estimated taxes as well as the annual payment in April for the previous tax year. Keep this in mind as you manage your finances – if you earn a sizable income via Amazon Flex, you may be due for a large tax bill at tax time. Additionally, as per IRS rules, you will be required to submit estimated taxes on a quarterly basis if you expect to owe 1000 USD in annual taxes along with additional criteria. State estimated tax rules will also vary by state.
Amazon states that they will send a 1099-MISC form to you on or before January 31 for the previous tax year, if you earned more than $600 USD in a calendar year. You should use this form to help fill out your Schedule C. Even if you do not hit the $600 USD minimum to trigger the 1099-MISC form, you are still obligated to report your taxes!
As an independent contractor, your day-to-day obligations in terms of rendering services will be similar to that of being an employee. Primarily, there are some important legal and tax implications to be aware of. Be aware of these differences and you should be on your way to having a successful and smooth experience.