An independent contractor (also known as a freelancer) is a person or entity who agrees to work for another person or entity as a nonemployee. Because of the independent contractor’s status as a nonemployee, the contractor must pay their own Social Security and Medicare (FICA) taxes. And unlike an employer, the person or entity hiring the independent contractor has no obligation to withhold income taxes from the contractor’s fees or to provide the contractor with any employee benefits. It is important for the person or entity who hires a worker to properly classify the worker as an employee or as an independent contractor based on the IRS’s right-to-control test.

In Maryland, the classification of a worker as an independent contractor or an employee is a significant legal determination that affects tax obligations and employment benefits. Independent contractors in Maryland are responsible for paying their own Social Security and Medicare taxes, as they are not considered employees. The hiring entity does not withhold income taxes from payments to independent contractors and is not required to provide them with employee benefits such as health insurance, workers' compensation, or unemployment benefits. The classification is guided by the IRS's right-to-control test, which examines factors such as the degree of control the hiring party has over the work performed and the worker's independence in performing their tasks. It is crucial for businesses to correctly classify workers to avoid legal consequences, including penalties and back taxes. Maryland may have specific guidelines and tests in addition to federal criteria to determine worker classification, and it is advisable for businesses to consult with an attorney to ensure compliance with both state and federal laws.