Contractor definition
/What is a Contractor?
Contractors offer their services to the general public. A person is classified as a contractor when he or she has control over how the work will be done. The buyer only controls the specifications for the completed work.
Examples of Contractors
Examples of contractors are independent auditors, attorneys, and doctors. The most common examples of contractors are those who work in the construction industry, such as independent electricians, plumbers, carpenters, and painters.
Contractor Taxation
A contractor must pay self-employment tax. The buyers of a contractor's services have no obligation to pay payroll taxes related to the amounts paid to the contractor. Employers need to be careful about defining payees as employees or contractors, to ensure that payroll taxes are accounted for correctly.
How to Pay a Contractor
Contractors are not paid through a company’s payroll system, because the company is not the contractor’s employer. Instead, a contractor is set up in the company’s accounts payable system as a separate vendor, and paid in accordance with the payment terms agreed upon by the two parties.