1099 Independent Contract Work

by William Pirraglia, Demand Media
Independent contractors perform specific tasks and projects for fees from employers.

Independent contractors perform specific tasks and projects for fees from employers.

Business image by Rhodan from Fotolia.com

Independent contractor jobs were growing in demand before the recession. As the United States enters a rather "soft" recovery period, independent contractors positions are dominating the workplace. The difference between an independent contractor (1099 worker) and an employee (W-2 worker) is often clear, but in some situations, the difference can be cloudy. In general, independent contractors are hired as temporary employees, consultants, web designers and others to perform specific, time-limited tasks and projects.

Work Hours

Some independent contractors are hired to work specified hours, for which they receive compensation for the number of hours worked. Others may be hired at a fixed price, receiving an agreed-to amount for working on a project basis. For example, an employer may hire a web designer to create a new e-commerce website by a specified date for $3,000. The employer cares little how many hours the contractor spends to bring the new website alive. The total fee is earned by completion of the project.

Employer Benefits

In most cases, employers deny access to all employee benefit programs to independent contractors. Most group health and life insurance contracts permit only full-time employees to participate.Other employer-funded benefits, like vacations, sick days, or education assistance are also reserved for full-time employees (W-2). Independent contractors are really self-employed individuals, responsible for their own benefits. For example, when a contractor wants to take a vacation, he does not need employer agreement -- unless he looks in the mirror.

Tax Issues

Independent contractors face very different tax issues than employees. Independent contractors are considered self-employed people, responsible for paying their own income taxes.They do have access to some tax write-offs unavailable to employees, like taking auto expense deductions to travel to and from the workplace. Employees are in their company's payroll system, with regular federal and state income tax withheld from their compensation. At year's end, employees receive W-2 forms, summarizing their earnings, withheld taxes (federal and state income, Medicare and social security). Independent contractors receive 1099 forms, showing the amount and type of compensation they received. They use each 1099 form to build their gross income for the year, on federal Schedule C, from which they then deduct their expenses.


There have been legal cases in every state regarding the court's interpretation of employee or independent contractor status. Employers often prefer having independent contractors, since they can simply cut a check for earnings, eliminate the need to account for and remit tax withholding to federal and state governments, and, of course, save large dollars in benefit costs. However, the legal choice is not really up to employers. If they require you to be at the workplace during consistent, repetitive hours, if they direct your work and if you perform identical tasks to other employees, your employer my face charges from U.S. or state attorneys general. In most, but not all, cases, you shouldn't face legal problems. There are cases, though, where complicity between contractor and employer is proven, where both parties can face serious legal issues.

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