This one always gets me mad. A lot of fly-by-night FBOs try to screw their employees by making them independent contractors. This gets the FBO out of paying its share of employment and unemployment taxes.
The IRS uses a number of tests to determine whether or not somebody is an independent contractor. Do you negotiate with each student about the rate that they will pay, or does the flight school set the rate for instruction? Does the student pay you directly, or does the flight school collect the money and pass it to you? Do you get the full amount that the student is charged for instruction, or does the flight school get some of it? Do you have your own insurance, or does the flight school provide it? Would your boss object if you also instructed at another FBO at the same field? (If so you are definitely not an independent contractor. Come to think of it, if you have a boss, you are not an independent contractor.) If a student shows up with his own airplane, and wants instruction for an instrument or commercial rating, does your boss want some of the money from the instruction? Do you show up at work in the morning and find a new student on your schedule that you didn't know about? (You are probably an employee.) Did you negotiate with the FBO about your hourly rate, or all instructors of a given level paid the same?
If you own your own airplane, and offer instruction, you are clearly self employed. If you yourself arrange to rent airplanes from the FBO and charge the students for instruction and some margin above the rental, you are also self employed.
If the student rents the airplane, and contracts with you for instruction, again, you are self employed.
As a new instructor, you probably won't pay much, if anything in income tax, but you will have to pay full medicare and social security tax of 15.4%. This is both the employee and employer portion, and the primary reason your FBO wants you as an independent contractor.
Joe
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