What is a 1099 Contractor

The 1099 contractor defines category of an employee who contracts his service to a business. The term is used for determination of tax status of the employee. It is closer to consultants, but since consultants are categorized as self-employed their status in the tax or legal terms is different. The 1099 contractor is considered to be an employee of a business or businesses to which they render their services, from project to project and on a freelance basis. Generally, writers, plumbers, construction contractors are included employees in this category.

Instructions

  • 1

    The 1099 contractor refers to a category of tax rules and also form of the United States' Internal Revenue Services. This is the category under which an employee who contracts his services with business and businesses can be taxed.

  • 2

    The 1099 contractor is an employee different from consultants who are defined by IRSĀ as self-employed and are taxed accordingly. Although 1099 contractor can work with different businesses on a freelance or project-to-project basis, they are considered to be an employee of that business and are taxed accordingly.

  • 3

    The 1099 contractor is category of an employee that is defined and used in the United States of America only and in other countries these type of workers might be referred as freelancers or even consultants, depending how their taxation authorities want to tax them. The income of these employees is assessed for taxation overall.

  • 4

    The 1099 contractor in the USA has to submit the 1099 form to the IRS providing details of all their work and other information so that they are taxed accordingly and do not face issues with tax return. The level and rate of tax is applied differently to other employees, and this mainly depends on the level of income of the employee.

  • 5

    The assessment of job income of 1099 employee is not assessed by general labour laws. For example, many contractors work on lower than minimum wage rate, but since their income is calculated at completion of the project, there is no issue of wage limit. The tax is deducted on the overall income, rather than the wage amount.

  • 6

    A 1099 worker or contractor is not constrained to work a limited number of hours in a week. It depends on job to job and assignment to assignment. Since their overall income is assessed for tax, there is no issue whether they complete the project while working round the clock or one or two hours on a daily basis.