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 York, the classification of a worker as an independent contractor or an employee is a significant legal determination that affects tax obligations and labor rights. Independent contractors, unlike employees, are responsible for paying their own Social Security and Medicare taxes, as they are not subject to tax withholding by the hiring party. The IRS's right-to-control test is a key factor in determining a worker's status; it assesses the degree of control and independence in the working relationship. Factors include the nature of the work, the degree of instruction, training, financial control, and the relationship between the parties. Misclassification can lead to legal consequences for the hiring entity, including penalties and back taxes. It's crucial for businesses in New York to correctly classify workers to comply with both federal and state tax laws, as well as labor regulations.