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 New Hampshire, the classification of a worker as an independent contractor or an employee is a significant legal determination that affects tax obligations and employment benefits. According to the IRS's right-to-control test, an independent contractor is someone who operates under a business arrangement and retains control over how their work is performed, as opposed to an employee who is subject to the employer's direction and control. Independent contractors in New Hampshire are responsible for paying their own Social Security and Medicare taxes, as they are not on an employer's payroll. Employers do not withhold income taxes for independent contractors and are not required to provide them with employee benefits such as health insurance, workers' compensation, or unemployment benefits. Misclassification of an employee as an independent contractor can lead to legal consequences, including penalties and back taxes. Therefore, it is crucial for businesses to accurately assess the working relationship using the IRS guidelines to ensure proper classification.