How is a taxpayer considered "self-employed"?

A taxpayer is considered "self-employed" when they earn income as an independent contractor or sole proprietor. This classification arises because self-employed individuals are essentially their own boss, running their own businesses or offering services directly to clients without working for a corporation or another employer. This form of earning income indicates that the individual has a degree of operational control, responsibility for expenses, and the ability to make decisions regarding their work activities.

In contrast, receiving a salary typically indicates an employment relationship where an individual works for someone else and is not considered self-employed. Working less than 20 hours a week does not determine self-employment status; it's more about the nature of the work relationship than the hours worked. Lastly, while managing a business with employees suggests a level of business operation, it does not accurately define self-employment as one can also manage a larger business entity and still not be classified as self-employed if they don't directly own or control the business affairs.