The formal sector consists of the businesses, enterprises and economic activities that are monitored, protected and taxed by the government, whereas the informal sector is comprised of the workers and enterprises that are not under government regulation. British anthropologist Keith Hart coined the term "informal sector" in 1973 as part of a study on Ghana. There are many conflicting theories as to the role and benefits of the informal sector.Know More
In contrast to the formal sector, the laborers, businesses and activities that make up the informal sector are not registered with or taxed by the government. For this reason, scholars sometimes refer to the informal sector as the black market, shadow economy or underground economy. Originally, the term referred to self-employed small enterprises like street vending, sewing, artisanry and small farming. It now also includes wage-earning jobs like crop-harvesting, cleaning and any other unprotected occupation.
Academics and policy-makers view the informal sector with conflicting views. Some believe the informal sector fuels entrepreneurialism and provides a cushion during economic crises. Others argue that the informal sector undermines taxation and regulation and thereby weakens the overall economy.
Globally, the informal sector is steadily growing. It constitutes the majority of the economy in both Latin America and Africa. This pattern is the result of governments' failure to plan for sufficient formal jobs in the face of expanding global communication and competition.Learn more about Taxes
Workers' compensation benefits received by workers or their dependants are not taxable in most cases. The exemptions include any compensation that workers would receive as part of their general benefits if they retire.Full Answer >
A 1099 employee tax form is used for workers that are considered independent contractors. These individuals are not technically employees of the company and do not have federal taxes withheld from their paychecks. They are required to file a 1099 form with their annual taxes.Full Answer >
The U.S. Internal Revenue Service assigns federal employer identification numbers to all businesses. Business owners apply online with all necessary information and instantly receive a nine-digit identifying number for all their future filings, according to IRS.gov.Full Answer >
Employers fill the name, addresses and federal identification numbers of their businesses, as well as their contract employees' names, addresses and Social Security numbers on 1099-MISC forms. Employers also fill the total amounts paid to contract employees for the year and any taxes withheld from these employees, states the Houston Chronicle.Full Answer >