Independent Contractor
Quick definition
A worker classified as self-employed for tax purposes. Receives 1099 income instead of W-2 wages.
An independent contractor is a worker who is self-employed for tax purposes. Independent contractors receive 1099-NEC forms instead of W-2s, file Schedule C, and pay self-employment tax.
How the IRS draws the line
The IRS uses three tests to determine contractor vs employee status: behavioral control, financial control, and the type of relationship. A worker who sets their own hours, supplies their own equipment, and bills per project is generally an independent contractor. A worker who is told when to show up, uses company equipment, and gets paid hourly is generally an employee.
Common independent contractor categories
- Gig drivers: Uber, DoorDash, Lyft, Instacart
- Real estate agents
- Freelance creative workers (designers, writers, photographers)
- Consultants and management contractors
- Trades workers paid 1099 by general contractors
Why mileage matters here
Independent contractor status is the main path to the federal mileage deduction in 2026. W-2 employees lost it permanently. If you are debating between W-2 and 1099 work in a job offer, the mileage and other Schedule C deductions can shift the math significantly.
Related terms
1099-NEC
The form payers issue to report $600+ in nonemployee compensation. If you got one, you are self-employed for IRS purposes.
Sole Proprietorship
The simplest business structure. One person, no separate legal entity, income flows to the owner's personal tax return.
Schedule C
The federal form self-employed workers use to report business income and expenses, including the mileage deduction.
Self-Employment Tax
The 15.3% tax on net self-employment income that funds Social Security and Medicare.
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