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 the person or entity hiring the independent contractor has no obligation to withhold income taxes from the contractor’s fees. 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 Massachusetts, the classification of a worker as an independent contractor or an employee is governed by both state and federal law. The IRS uses the 'right-to-control test' to determine a worker's status, which assesses the degree of control and independence in three categories: behavioral control, financial control, and the type of relationship between the parties. Massachusetts has its own stringent test for determining independent contractor status, outlined in the Massachusetts Independent Contractor Law (Mass. Gen. Laws ch. 149, § 148B). This law presumes that a worker is an employee unless the hiring entity can prove three conditions: the worker is free from control and direction in connection with the performance of the service, the service is performed outside the usual course of the business of the employer, and the worker is customarily engaged in an independently established trade, occupation, profession, or business of the same nature as that involved in the service performed. Independent contractors in Massachusetts are responsible for paying their own Social Security and Medicare taxes, and the hiring entity is not required to withhold income taxes from the contractor’s fees. Misclassification of an employee as an independent contractor can result in legal consequences, including penalties and back taxes.