AI agents for business finance: what they can and can't do
What AI agents can do in bookkeeping, close, collections and compliance today, where a person must stay in charge, and how to judge a product.
The short answer
For US tax, whether you are an employee or an independent contractor depends on the real relationship, not the job title or the form you receive. The IRS weighs behavioural control, financial control and the type of relationship. Contractors report their pay on Schedule C and pay self-employment tax of 15.3%; employees of a US payroll have tax withheld, while employees of a foreign employer with no US payroll usually report wages themselves.
Nigerian companies hiring abroad often choose the label that is easiest for their own payroll. Some call everyone a consultant; others put a US-based hire on the same staff contract as the Lagos team. The IRS does not take the label as the answer. This guide explains how status is judged, what each status means for your US tax, and the questions to settle with the company. It is information, not tax advice.
How the IRS decides
The IRS page on independent contractors and employees (reviewed 19 May 2026) says all information that provides evidence of the degree of control and independence must be considered, and that the key is to look at the entire relationship. It groups the evidence in three categories:
- Behavioural
- Does the company control, or have the right to control, what you do and how you do it? Set hours, required methods and close supervision point towards employment.
- Financial
- Are the business aspects of the job controlled by the payer? Who provides equipment, whether you can make a profit or loss, whether you invoice or receive a salary, whether you can work for others.
- Type of relationship
- Are there written contracts or employee-type benefits such as paid leave, pension or health cover? Is the relationship expected to continue indefinitely? Is your work a key part of the company's regular business?
The IRS Paying yourself page adds that the form issued, a W-2 or a 1099-NEC, does not by itself determine status. Where it is unclear, the IRS says either the business or the worker can file Form SS-8 for a determination, which can take at least six months.
What each status means for your US tax
| Independent contractor | Employee | |
|---|---|---|
| Where income goes | Schedule C as business income | Wages on Form 1040 |
| Social Security and Medicare | Self-employment tax, 15.3% on net earnings, if $400 or more | Withheld through payroll if the employer runs US payroll; otherwise depends on employer and rules |
| Business expenses | Deductible on Schedule C | Generally not deductible |
| Tax during the year | Estimated tax payments | Withholding, if on US payroll |
| Typical paperwork | Invoices; 1099-NEC only from a US payer | W-2 only from a US payroll |
The IRS self-employment tax page sets the rate at 15.3% (12.4% Social Security and 2.9% Medicare) on net earnings, payable if they are $400 or more, with half deductible in working out adjusted gross income. IRS Publication 54 says Social Security and Medicare may apply to wages regardless of where services are performed, with rules on American employers and foreign affiliates. A Nigerian company with no US entity is not an American employer under that definition, so if it treats you as an employee, how Social Security applies to work done in the US is a point for a US tax professional.
A worked example
Example only. You earn $60,000 a year from a Nigerian company. As a contractor with $4,000 of business expenses, your Schedule C profit is $56,000, and self-employment tax is calculated on that profit through Schedule SE. As an employee of a Nigerian company with no US payroll, you report the $60,000 as wages, there are no Schedule C expense deductions, and no US tax has been withheld, so you would need to plan payments during the year. Neither route is automatically cheaper; the right one is the one that matches how you actually work.
Points to settle with the company
- Ask what status it intends, and make sure the contract matches the day-to-day reality.
- If you are a contractor, keep the features that support it: your own tools, control over how you work, freedom to take other clients, invoices rather than payslips.
- If you are an employee, ask whether any US entity in the group will run payroll, or whether you will be paid from Nigeria.
- In either case, ask what Nigeria will deduct and get receipts.
For the payroll side, see remote job at a Nigerian fintech: payroll; for wage reporting, US tax on income from a Nigerian employer; and for the contractor's tax bill, self-employment tax on income from Nigerian clients.
Where Pryme fits
Whichever status applies, a Pryme account can receive dollars into USD details and naira into NGN details, keeping each payment's record for your tax preparer. Business Account holders can send invoices and use the Finance agent to prepare a monthly summary of income by client, which you review and approve.
Questions people ask
Does my contract title decide if I am an employee for US tax?
No. The IRS looks at the whole relationship: behavioural control, financial control and the type of relationship.
Can I ask the IRS to decide my status?
Yes. Either you or the business can file Form SS-8. The IRS says a determination can take at least six months.
Do contractors for Nigerian companies pay self-employment tax?
Yes, if net earnings are $400 or more. The IRS lists the rate at 15.3%.
Is it better to be a contractor or an employee?
It depends on how you work and how you are paid. Contractors can deduct business expenses but pay self-employment tax and handle estimated tax themselves.
Sources
- IRS: Independent contractor (self-employed) or employee? (reviewed 19 May 2026) · accessed Oct 2026
- IRS: Paying yourself (8 May 2026) · accessed Oct 2026
- IRS: Self-employment tax (Social Security and Medicare taxes) · accessed Oct 2026
- IRS: Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad (Rev. Dec 2025) · accessed Oct 2026
This article is general information, not financial, legal or tax advice. Products described are provided under the terms on this site and are subject to regulation and eligibility.