As with any employment contract, independent contractors are also limited by certain clauses to protect the employer, including:Īdditionally, there is a clause written in the agreement that determines copyright ownership (on behalf of either the contractor or employer) for any original work that the independent contractor produces, along with resolution methods for any legal disputes. The agreement lays out the details of the job, from the service provided and the length of the work term, to how the independent contractor will be paid. By extension, it distinguishes the independent contractor from an employee of the business for legal and tax purposes. What is an Independent Contractor Agreement?Īn independent contractor agreement is a document that an employer uses to hire a freelancer for a specific job. They must fill out a W9 form to file taxes, and each employer that has paid them at least $600 for their work must send them an IRS Form 1099 for that tax year. Since the IRS classifies independent contractors as self-employed workers, they’re subject to Self-Employment Tax requirements.
Independent contractor status is also granted based on whether they receive employee benefits, and if the employer handles financial aspects of the contractor’s job, such as reimbursing expenses or providing supplies. The employer can only dictate the results of the work assigned and not the process. Generally, the IRS defines an independent contractor as someone who can control how the work will be done and what will be done. They can also be a business owner that serves the public, such as a veterinarian or a lawyer.
Independent contractor agreements are also called 1099 agreements, freelance contracts, or subcontractor agreements.