An independent contractor agreement is a written contract between a business or individual hiring an independent contractor, that specifies the terms of the agreement, such as the services performed, the payment amount and structure, estimates of the amount of time the job will take, a statement that the hirer and the worker agree to an independent contractor relationship, and how the agreement is terminated and disputes resolved. It also helps establish a worker’s independent contractor status by showing the IRS and other agencies that both you and the worker intended to create a hiring firm/ independent contractor relationship, not an employer/ employee relationship.
An “independent contractor” is a person or business who performs services for another person under an express or implied agreement and who is not subject to the other’s control, or right to control, the manner and means of performing the services. People who are in an independent trade, business, or profession in which they offer their services to the general public are generally independent contractors, such as doctors, dentists, veterinarians, lawyers, accountants, contractors, subcontractors, plumbers and musicians.
An “employee” is different than an independent contractor because an employee performs services that can be controlled by an employer, such as what work will be done and how it will be done. What matters is that the employer has the legal right to control the details of how the services are performed.
Generally, you must withhold income taxes, withhold and pay Social Security and Medicare taxes, and pay unemployment tax on wages paid to an employee. You do not generally have to withhold or pay any taxes on payments to independent contractors.
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