What Is an Independent Contractor?

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Definition: The definition of an independent contractor is a specific term used by the IRS to define 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 what the end product or result should be. While many people think of independent contractors as people who telecommute, they may work on-site too.

Independent contractors are classified as such by the IRS for the purpose of determining whether they should pay payroll taxes of self-employment tax. 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 client to file with their income taxes. Consult a tax account for more information.

Always clarify with a potential employer whether you would work as telecommuting employee or an independent contractor.

Also Known As: freelancer, consultant