According to The Wall Street Journal, ICs are usually paid at least 20% to 40% more per hour than employees performing the same work. Hiring firms can afford to pay ICs more because they don't have to pay Social Security taxes or unemployment compensation taxes, provide workers' compensation coverage, or provide employee benefits like health insurance and sick leave. Of course, how much you're paid is a matter for negotiation between you and your clients. ICs whose skills are in great demand may receive far more than employees doing similar work.

You can also take advantage of many business-related tax deductions that are not available to employees. When you're an IC, you can deduct from your taxable income any necessary expenses related to your business, as long as they are reasonable in amount and ordinarily incurred by businesses of your type. This may include, for example, office expenses (including costs associated with a home office), travel expenses, entertainment and meal expenses, cable TV and magazine expenses, equipment and insurance costs, and much more.

ICs can also establish tax-advantaged retirement plans such as SEP-IRAs and Keogh Plans. This enables them to shelter a substantial amount of their income until they retire.

Because of these tax benefits, ICs often pay less tax than employees who earn similar incomes.