What Is a Contractor?
A contractor is an individual hired by a company to perform a specific job or deliver a particular service, without being treated as a regular employee. Unlike full-time staff, contractors typically work independently and are engaged for short-term or project-based needs.
Understanding the Contractor Relationship
Hiring contractors allows businesses to avoid the long-term obligations associated with traditional employment, such as benefits, payroll taxes, and extensive compliance requirements. On the flip side, contractors enjoy the freedom to choose their projects, set their schedules, and often work with multiple clients.
The Internal Revenue Service (IRS) outlines clear distinctions between contractors and employees. The core difference lies in control, businesses generally direct how and when employees work, while contractors maintain autonomy over how they complete their assignments.
Because they’re self-employed, contractors are responsible for handling their own tax payments. Instead of receiving a W-2 like regular employees, they’re issued a Form 1099-NEC when they earn $600 or more from a single client in a calendar year.
To make managing contractor payments and tax forms easier, businesses often rely on trusted solutions like Beyond, which helps streamline payments and ensure compliance with IRS rules.