Definition: The IRS defines an independent contractor as a self-employed person who does project-based work.
The company that contracts the work does not direct “the means and methods” by which the independent contractor completes the assignment, but it does dictate the end product or result. While many people think of independent contractors as people who telecommute, they may also work on-site.
The IRS classifies independent contractors as such to determine whether they should pay payroll taxes or self-employment taxes. Income taxes are based on the independent contractors’ business structure, which is commonly a sole proprietorship but could be an LLC, corporation, or partnership.
If paid $600 or more, independent contractors should receive a 1099-MISC tax form from their clients to file with their income taxes. Consult a tax account for more information.
Always clarify with a potential employer whether you would work as a telecommuting employee or an independent contractor.
Also Known As: freelancer, consultant
