Definition of a 1099 contractor
What is a 1099 Contractor?A 1099 contractor, also known as an independent contractor, is an individual or entity that provides services to another business under the terms specified in a contract or agreement. Unlike traditional employees, 1099 contractors are not considered direct employees of the hiring company. Instead, they operate as independent entities, responsible for managing their own taxes, benefits, and work arrangements.Characteristics of a 1099 ContractorWe will discuss the defining characteristics of a 1099 contractor, including:
- Independence: 1099 contractors have the autonomy to manage their work schedules, methods, and tools independently, often working on a project-by-project basis.Tax Treatment: Unlike traditional employees who receive a W-2 form for tax purposes, 1099 contractors receive a Form 1099-NEC from clients, and they are responsible for paying self-employment taxes.Contractual Agreements: 1099 contractors typically operate under specific contracts or agreements that outline the scope of work, compensation, and other pertinent terms.Flexibility: Due to their independent status, 1099 contractors have the freedom to work for multiple clients simultaneously, offering flexibility in their professional engagements.