Navigator Independent Contractor

An independent contractor is a self-employed individual or organization contracted to perform work or provide services as a non-employee. Independent contractors are not covered by a majority of the same laws that are in place for the benefit of employees, such as wage-hour, leave requirements, unemployment benefits, and equal opportunity laws.

In short, compliance is following all federal, state and local labor and employment laws and requirements that apply to an organization.

Federal, state, and local laws and regulations, including tax laws, as well as court opinions interpreting these laws and regulations, define independent contractor status. One of the challenges for employers is that these laws, regulations, and court opinions differ widely.

In order to properly classify a worker as an independent contractor, organizations will need to consider the tests for IC status under all applicable federal, state and local laws and regulations, and the court opinions interpreting them.  The laws and cases most frequently arise in the context of wage-hour, unemployment, workers' compensation, employment tax, and equal employment opportunity disputes.

Companies that pay an independent contractor $600 or more during the year must provide the independent contractor with IRS Form 1099-NEC, which the company must also file with the IRS.  Independent contractors should also be asked to complete IRS Form W-9 with their full name and Taxpayer Identification Number.

Employers must provide any employee paid $600 or more in wages with IRS Form W-2, also known as a “Wage and Tax Statement.” The W-2 must also be sent to the IRS, the Social Security Administration, and local and state tax authorities.