Contractor Definition

A contractor is a person or company who performs work independently or for a third party, usually under contract.

Contractor Extended Definition
An independent contractor is a self-employed individual and is not considered an employee of the business.

When you work with a contractor, you must report their annual payments (i.e., nonemployee compensation) on Form 1099-NEC, Nonemployee Compensation. This shows the amounts you paid them for their work during the year.

Employers must determine whether an individual is an employee or contractor using Department of Labor and IRS tests. These tests focus on control of the individual’s work.

Contractor may also refer to someone who goes through contract staffing services. This is a hiring arrangement where the individual’s work is generally temporary, and a third-party employer of record handles their payroll.

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Last Updated By

Rachel Blakely-Gray | Feb 16, 2023