An independent contractor is a natural person, business or corporation which provides goods or services to another entity under terms specified in a contract or within a verbal agreement. Unlike an employee, an independent contractor does not work regularly for an employer but works as and when required, during which time she or he may be subject to the Law of Agency. Contractors often work through a limited company which they themselves own, or may work through an umbrella company.

In the United States, any company or organization that pays more than $600 to an independent contractor in one year is required to report this to the IRS as well as to the contractor, using form 1099-MISC [1]. This form is merely a report of monies paid; independent contractors do not have income taxes withheld from their pay as regular employees do. When filing taxes, the independent contractor can deduct from his declared income work related expenses, such as tools or safety gear needed for the work that were purchased by the contractor himself.