Independent Contractor Definition

Term Definition

Businesses may hire qualified persons called ‘independent contractors’ to perform certain services. They are non-employees and paid differently than employees. For more information, please consult theIRS.

Extended Definition

Business owners must accurately determine if the individuals providing services are independent contractors or employees. An independent contractor is someone who has his/her own business but performs services for another business. Business owners design payroll for non-employee independent contractors differently from their employees. Generally, they are required to withhold and pay Medicare and Social Security taxes, withhold income taxes, and pay unemployment taxes on employee wages. In case of independent contractors, businesses do not have to pay or withhold any taxes on payments. To understand more about independent contractors, common law rules, and employee misclassification, please refer to theIRSpage.

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