1600.2.18 Contract Income

Count as earned income or unearned income depending on the source of the income. Examples : Teacher income is earned income, annuity income is unearned.

Contract income is a fixed salary for a contracted service paid to the earner over the duration of the contract. They are not paid hourly. Examples: teachers or other school employees who receive their annual pay in nine months, web designer who signs a contract to provide services over a certain period with agreed upon compensation. Calculation: Salary from contract divided by number of months contract covers regardless of payment schedule equals gross monthly income. Request a copy of the contract to review its terms, compensation and length.

Contract income paid hourly is normal Wages not contract income.

Contract income is self-employment income if the person works under contract to customers of their business.

Payments to persons who are called subcontractors for the convenience of the employer are not contract income, they are self-employed.