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 Oregon, the classification of a worker as an independent contractor or an employee is crucial for tax and legal purposes. Independent contractors, unlike employees, are responsible for paying their own Social Security and Medicare taxes, as they are not subject to withholding by the hiring party. The hiring entity is not required to withhold income taxes from the fees paid to an independent contractor. Proper classification is governed by the IRS's right-to-control test, which examines factors such as the degree of control the hiring party has over the way the worker performs their tasks, the financial control over the business aspects of the worker's job, and the relationship between the parties. Misclassification can lead to legal and financial penalties. It is important for businesses in Oregon to adhere to these federal guidelines, as well as any relevant state statutes, to ensure they are in compliance with the law regarding worker classification.