An independent contractor is a person or business that provides services to another entity under a contract, but is not an employee of that entity.
Independent contractors are typically self‑employed and responsible for managing their own business operations and taxes.
🔍 Key Characteristics
| Description |
|---|
| Self‑Employed – Operates their own business and may work for multiple clients. |
| Controls the Work – Decides how, when, and where the work is performed. |
| No Employee Benefits – Does not receive employer‑provided health insurance, paid leave, or retirement plans. |
| Pays Own Taxes – Responsible for income tax and self‑employment tax (Social Security and Medicare). |
| Receives Form 1099‑NEC – Typically issued when total payments for services are $600 or more for the year. |
📌 Example
A freelance web developer is hired to build a company’s website.
- They use their own equipment
- Set their own schedule
- Invoice the company for services
- Work with other clients
✅ The developer is an independent contractor, not an employee.
💡 Helpful Notes
- Independent contractor status is based on control and independence, not job title
- Contractors generally report income on Schedule C
- Misclassification (employee treated as contractor) can cause tax issues for both parties
- Receiving no 1099 does not mean the income is not taxable