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 New Hampshire, the classification of a worker as an independent contractor or an employee is a significant legal determination that affects tax obligations and labor rights. 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 completed, 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 considered employees. The hiring entity is not required to withhold income taxes from payments made to independent contractors. It is crucial for businesses to correctly classify workers to avoid legal repercussions, including penalties and back taxes. New Hampshire may have specific statutes that further define independent contractor status and the criteria for proper classification, which must be adhered to in conjunction with federal guidelines.