A 1099 contractor, also known as an independent contractor, is a self-employed individual who provides specific services to businesses or clients without being an official employee. Instead of a traditional W-2 form, independent contractors receive a Form 1099-NEC at tax season, reflecting the payments received over the year.
Businesses commonly hire 1099 contractors for specialized skills, temporary projects, or tasks that don't require full-time employees. Examples range from consultants and freelance writers to graphic designers or software developers. Unlike employees, these contractors control how and when they complete their tasks, demonstrating significant independence and flexibility.
However, with increased freedom comes added financial responsibilities. 1099 contractors must manage their own taxes, often paying quarterly estimated payments to the IRS. They must also handle self-employment taxes, which include Social Security and Medicare contributions.
Due to complexities in taxation and IRS regulations, it's beneficial for contractors to thoroughly understand IRS guidelines related to self-employment and the 1099 form. For details, see the official IRS resource page on independent contractors and self-employment taxes: IRS Independent Contractor Definition.
Knowing the distinctions between employees and contractors enhances clarity and compliance for everyone involved.
