Independent Contractor (1099) Agreements (39)

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Updated May 17, 2022

An independent contractor agreement is between a contractor that performs a service for a client in exchange for payment. The contractor is not an employee of the client. Therefore, the contractor is responsible for payment of their withholding tax to local and federal authorities (per IRS Rules).

Basic Versions (2)


Simple Version (2 pages)

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Comprehensive Version (5 Pages)

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By State

 

Table of Contents

By Profession (26)

By Type (10)

What is an Independent Contractor?

An independent contractor is classified by the IRS, under 26 CFR 31.3121(d)-1, as someone who conducts the following activities:

  • Able to control how their services are completed;
  • Able to work their own schedule and hours;
  • May control their work attire;
  • Salespersons paid solely on commission (except insurance salespersons);
  • Uses their own tools and equipment when performing services; and
  • Part-time corporate officers.

Ultimately, an independent contractor is an individual who has their own boss and sets their own rules to justify how they work and their output. Generally speaking, if an individual is paid on a per-project or task manner, they will most likely be considered an independent contractor. If the individual is paid a salary, must adhere to a specific schedule, and is dictated what to do in every facet of their workday, they will most likely be considered an employee.

Independent Contractors: By Right (IRS)

Specifically, the following professions are independent contractors by right under IRS Rules:

  • Physicians;
  • Lawyers;
  • Dentists;
  • Veterinarians;
  • Construction contractors;
  • Public stenographers; and
  • Auctioneers.

How to File Taxes

Independent contractors must use IRS Form 1099 – MISC and file at the end of the year to file their taxes with the Internal Revenue Service (IRS).

How to Hire an Independent Contractor

Once an individual or company has decided that services are needed, they will need to determine which independent contractor works best for them. Once a contractor is found, it is time to write an agreement.

Step 1 – Independent Contractor Completes IRS Form W-9

IRS Form W-9 should be given to the independent contractor and have completed before signing any agreement. This will identify themselves and require to give their Employer Identification Number (EIN) or Social Security Number (SSN) before performing any work.

This form is required to be stored by the client for a period of four (4) years although is not required to be filed with the IRS.

Step 2 – Verify the Contractor

Before hiring the services of a third (3rd) party, it’s best to verify the credentials of the individual or business by looking up all reviews, past work, along with conducting necessary background checks.

  • Business Entity

For entities, it’s a bit harder to perform a background check. The best way is to simply conduct a search on Google and try to view any negative results. To ensure the entity is valid to do business in the State where the services are being performed a check on the Secretary of State (Search By State).

Websites like Yelp, RipOffReport, Facebook, BBB.org, and TrustPilot are great resources for viewing a customer testimonials.

  • Individual

It’s best to conduct a criminal background check and check with past references to verify the character of the person. For past employment, use LinkedIn as a means of viewing past employers. If agreed by the contractor, the past employers should be contacted in an effort to get to know their integrity and work ethic.

Step 3 – Negotiate with the Contractor

Once the contractor has been vetted and qualified, it’s not time to discuss the terms of service. This should include:

  • Payment;
  • Term;
  • Scope of Work;
  • Responsibilities;
  • Confidentiality;
  • Non-Compete;
  • Liability; and
  • Insurance

After a verbal agreement has been reached, the parties can decide to authorize a work order or to move straight to a binding written independent contractor agreement.

Step 4 – Completing the Form

Download: Adobe PDF, Microsoft Word (.docx), or Open Document Text (.odt)

Use the template and write yourself or seek legal counsel. After the parties have filled-in the document and completed it is now ready to be signed.

Step 5 – Signing the Agreement

The agreement should be signed by all the parties in the presence of a witness or notary public (or both). In addition, the form should be initialized on the bottom of every page to mark that each item of the contract has been agreed upon by all of the parties.

At this time, the contract is finalized and legally binding to both parties.

Step 6 – File IRS Form 1099

If payment to the independent contractor is more than $600 over the course of a calendar year, the client will be required to file IRS Form 1099 with the Internal Revenue Service (IRS) when they pay their taxes on April 15.

State Definitions (Laws)

Video: How to Make an Independent Contractor Agreement

How to Write

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I. The Parties Behind This Agreement

(1) Independent Contractor Client Information. The name of the Independent Contractor’s Client is required in the first article. This will solidify the identity of the Signer so that this Party can be properly bound to this agreement. Supply the Client’s legal name and support this identity with a record of the mailing address needed to reach him or her. There will be an individual space for each of these items.

(2) Independent Contractor Information. The name of the Independent Contractor that will provide the services this agreement discusses must be furnished where requested. Locate the “Contractor” section, then by making use of the spaces available, supply his or her legal name with the mailing address where official communication regarding this contract should be sent.

(3) Calendar Date Of Terms And Conditions. The date that marks when the agreement between the Independent Contractor and his or her Client becomes active or effective must be clearly established. Distribute this date using the formatted spaces in the statement on display.

II. The Services

(4) Contracted Services. The services that the Client will pay the Independent Contractor to provide through this agreement requires definition. Article II handles this task by requesting that every service the Client expects from the Contractor be documented in its content. Be advised that should a service, task, or job remain undefined in this section, then the Client will not necessarily be able to use this agreement to obtain the undocumented service from the Contractor.

III. Payment

Select Item 5, Or Item 6, Or Item 7, Or Item 8

(5) By The Hour. If the Independent Contractor and the Client agree that a per hour pay rate should be instituted for the duration of the Contractor’s work hours, then mark the first checkbox in Article III. Once selected, a record of the amount of money per hour the Independent Contractor will earn is needed in the space provided.

(6) By Contracted Service. If the Independent Contractor will earn a predetermined payment for each service provided, select the second checkbox then document the dollar amount that will be earned per service.

(7) By Commission. In some cases, the Independent Contractor will agree to work on commission. If so, mark the third checkbox and define the commission payment by recording its predetermined dollar amount or the formula that will be used to calculate it.

(8) Other Payment. If payment will be calculated in a manner “Other” than using the previously named methods, then select the final checkbox. The blank line after “Other” requires that the amount earned by the Independent Contractor and how that amount is calculated be defined specifically.

Select Item 9, Or Item 10, Or Item 13

(9) Submitted Only When Completed. In addition to the amount that will be paid to the Independent Contractor, the schedule or timing of his or her payment must be established. If payment will be expected only when the service(s) the Independent Contractor is providing has been completed, then select the checkbox corresponding to the “At Completion” statement.

(10) Periodic Payments Schedule. If the Independent Contractor will be paid on a regular basis for the duration of this project, then mark the first checkbox preceding the words “On A…” This will require a second selection from the content of this statement.

(11) Tye Of Scheduled Payment. Indicate if the Independent Contractor’s pay will be submitted on a  “Weekly,” “Monthly,” or on a “Quarterly Basis” (every three months) by marking the checkbox attached to the most accurate definition for how often the Independent Contractor will be paid.

(12) Start Of Payment Schedule. Once this selection is made, produce the first calendar date when the Independent Contractor’s pay schedule begins. This will be the first calendar date when the Independent Contractor receives payment from the Client.

(13) Other Types Of Payment Submission. If the Independent Contractor will be paid according to a schedule or upon a specific event/date that cannot be properly defined by the above selections, then mark the “Other” checkbox and describe when and how often the Client shall pay the Independent Contractor.

IV. Due Date

Select Item 14, Or Item 15, Or Item 16

(14) Predetermined Date Of Completion. If the Client and Independent Contractor agree that the services rendered will have a due date applied, then the first checkbox statement in Article IV should be chosen by placing a mark in the appropriate checkbox. Naturally, in order for this statement to impose a due date for the completion of the Independent Contractor’s services, this date will need to be presented. Supply the exact calendar date that the Client and Contractor agree all commissioned work (defined in this document) will terminate to the spaces provided by this selection.

(15) Not Due Date Imposed. If the Independent Contractor and the Client do not wish to set a calendar date to the termination of the contracted services, then select the second checkbox.

(16) Other Definition For Completion. If neither of the previous choices can adequately set the manner by which the job will be considered complete, then select the “Other” checkbox. This requires a description of how the due date (if any) will be set. For example, it may be set to an event date that as of yet has not been scheduled.

V. Expenses

(17) Contractor Responsibility. Quite a few contracted services will incur expenses relating to items ranging from equipment to disability Insurance. If the Independent Contractor will be held responsible to pay for any item needed for the completion of the Client’s project, then the first statement must be selected from the Fifth Article.

(18) Contractor Reimbursement. If the Client agrees to reimburse the Independent Contractor for job expenses within thirty days of receiving an invoice, then the second checkbox must be selected. A clear description of each item that the Client will consider reimbursable to the Independent Contractor should be listed. If an item (i.e. taxes) is not listed here, then the Independent Contractor should not consider it reimbursable and will have to absorb the cost.

IV. Liability Insurance (Minimum ($) Amount)

Select Item 19 Or Item 20

(19) Minimum Required. This agreement will address the topic of liability insurance in the fourth article. The Independent Contractor can be expected to obtain then maintain liability insurance for this project if the first statement is selected from this article and the dollar amount defining the minimum combined single limit of the liability insurance is produced to the content of this statement.

(20) No Minimum Required. If this agreement should not be set to require the Independent Contractor to carry liability insurance with a predetermined (through this agreement) amount of coverage, then select the second statement.

VII. Termination

Select Item 21, Or Item 22, Or Item 23

(21) When Contracted Services Are Complete. The manner in which this agreement terminates (naturally) can be considered dependent on whenever the Independent Contractor has finished the assignment should both Parties desire this to be the criteria for termination. If so, then select the first statement from Article VIII.

(22) Expected Date Of Termination. If both Parties have determined that this agreement shall terminate upon a predetermined calendar date, the second statement option presented in Article VII should be selected. It is imperative that the date of this agreement’s termination be recorded in this statement once this selection is made. Bear in mind, that this calendar date should not be prior to any of the calendar dates reported earlier in this agreement.

(23) Other Method Of Termination. If the manner this agreement terminates cannot be described with the previous items, then the “Other” statement should be selected. In addition to making this selection, use the blank space to document the exact circumstance, condition, or event that shall mark the natural termination of this agreement.

VIII. Option To Terminate

Select Item 24 Or Item 25

(24) Termination At Will. If desired these Parties (the Independent Contractor and Client) can be given the option to terminate this agreement at will with a reasonable amount of notice as required by this document. To set this in motion, select the first statement option in Article VIII. Then, indicate the number of days’ notice that the Remaining Party may expect from the Terminating Party by documenting it in the space provided. This selection will give each Party the right to terminate this agreement at will.

(25) Only With Reasonable Cause. If neither Party (Independent Contractor And Client) will be allowed to terminate this agreement unless one of the conditions in Article VII has been observed, then select the second checkbox statement.

XX. Governing Law

(26) Jurisdiction. The next topic will be the jurisdiction that shall enforce this agreement when necessary. In Article XX, name the State whose jurisdiction and court system will enforce the contents of this agreement.

XXXIII. Additional Terms And Conditions

(27) Additional Agreement Requirements. This paperwork shall seek to fully define the agreement made between the Independent Contractor and the Client. This can only be accomplished if any of the topics these two Parties wish included but has not been discussed thus far are documented in Article XXXIII. Some area has been set aside for this task but if more room will be needed then additional lines may be inserted. If preferred, an attachment with the balance of the agreement can also be developed and presented with this document at all times. Any requirement or agreement not contained in this paperwork by the time it is signed will not be considered part of this contract.

XXIV. Entire Agreement

(28) Client Signature And Name. This paperwork will only have the ability to bind the Client to its content if the Client signs it. If the Client is a Business, then that Business’ Signature Representative may sign on its behalf. The signature will have to be presented by the Client along with his or her printed name.

(29) Contracted Client Signature Date.

(30) Contractor Binding Signature. The Independent Contractor must also enter this agreement through the act of signing his or her name and printing it.

(31) Signature Date Of Independent Contractor.