Independent Contractor Agreement

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What Is an Independent Contractor?

Often referred to as a “1099 agreement,” this type of contract defines the working relationship, outlines payment terms, and ensures legal clarity for both parties.
According to IRS guidelines, an independent contractor is an individual or business that:

• Controls how and when work is performed
• Sets their own hours and work methods
• Uses their own tools or equipment
• May work for multiple clients or projects
• Is typically paid per task, project, or commission
  

Independent contractors are responsible for paying their own taxes and do not receive benefits like health insurance or paid time off. Unlike employees, they are not subject to payroll tax withholding by the hiring party.

Common Professions Recognized as Independent Contractors:

• Physicians
• Lawyers
• Dentists
• Veterinarians
• Construction Contractors
• Auctioneers
• Public Stenographers
  

 

Tax Obligations

Independent contractors must:

• Complete IRS Form W-9 when beginning work
• Track and report earnings using Form 1099-NEC
• Pay their own federal, state, and local taxes, including self-employment tax

Clients must file Form 1099-NEC if total payments to the contractor exceed $600 in a calendar year.

 

How to Hire an Independent Contractor

Step 1: Have Them Complete IRS Form W-9

Before any work begins, the contractor must fill out IRS Form W-9. In the form, they provide their legal name, address, and a Social Security Number (SSN) or Employer Identification Number (EIN). Clients should retain this form for at least four years.

Step 2: Verify the Contractor

Research the contractor’s credentials, reviews, and past work. You may use websites like Yelp, BBB.org, and TrustPilot to find a contractor’s reputation.

• For individuals: conduct a background check and speak with references. LinkedIn helps review professional history.
• For businesses: search their name online, check for complaints, and verify their registration through the state’s Secretary of State website.

Step 3: Negotiate the Terms

Discuss and agree on the terms, including:

• Scope of Work
• Payment structure and schedule
• Timeline or project duration
• Confidentiality clauses
• Non-compete and non-solicitation terms
• Liability and insurance requirements

Once verbal terms are in place, move forward with a formal agreement.

Step 4: Complete the Agreement

Use the template and fill in all relevant details. Make sure each section reflects the agreed-upon terms.

Step 5: Sign the Agreement

Both parties should sign the agreement—preferably in the presence of a notary public or witness. Each page should be initialed to confirm mutual understanding of all terms. Once signed, the contract is legally binding.

Step 6: File Form 1099-NEC (if applicable)

If the contractor is paid over $600 during the calendar year, the client must issue Form 1099-NEC and submit a copy to the IRS by January 31st of the following year.