An independent contractor is a self-employed person or entity contracted to perform work for—or provide services to—another entity as a nonemployee. As a result, independent contractors must pay their own Social Security and Medicare taxes.

The general rule is that an individual is an independent contractor if the payer has the right to control or direct only the result of the work and not what will be done and how it will be done. The earnings of a person who is working as an independent contractor are subject to Self-Employment Tax.

Who are independent contractors in the United States?

Independent contractors (often called 1099 contractors in the US) are people who offer their professional services to clients. They are usually self-employed owners of small businesses that you hire for a fixed period of time or on a project basis.

When to hire an employee or an independent contractor?

A company must weigh all the factors when determining whether a worker is an employee or an independent contractor. Some factors might indicate that the worker is an employee, while others suggest that the worker is an independent contractor.

Can a company penalize a foreign independent contractor?

Many companies hiring overseas contractors don’t realize that they are suddenly exposed to more legal liabilities under foreign laws. Learn how your company can reduce the risks associated with hiring a foreign independent contractor. 1. You can be penalized if your foreign independent contractor is actually an employee

What does it mean to be a self employed contractor?

Jean Murray, MBA, Ph.D., is an experienced business writer and teacher. She has written for The Balance on U.S. business law and taxes since 2008. If you are working for yourself, and if you aren’t an owner or employee of a corporation, you are an independent contractor. In other words, you are considered self-employed.