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 Oregon, the classification of a worker as an independent contractor or an employee is crucial for tax and legal purposes. According to the IRS's right-to-control test, an independent contractor is someone who operates under a business structure separate from the hiring entity and maintains control over how their work is performed. Unlike employees, independent contractors in Oregon are responsible for paying their own Social Security and Medicare taxes, as they are not subject to payroll withholding. The hiring entity does not provide benefits such as health insurance, workers' compensation, or unemployment insurance to independent contractors. Misclassification of an employee as an independent contractor can lead to legal consequences, including penalties and back taxes. Oregon law also provides specific criteria to determine independent contractor status, which includes factors such as maintaining a separate business location, having the authority to hire and fire assistants, and being engaged in an independently established business. It is essential for businesses to accurately classify workers to comply with state and federal regulations.