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Rise Glossary

What is a 1099 Employee?

A 1099 employee, also known as an independent contractor, is a person who performs work for a business or organization but is not considered an employee for tax purposes. Independent contractors are responsible for paying their own taxes and are not eligible for the same benefits as employees, such as unemployment insurance or workers' compensation.

Independent contractors are typically paid on a project-by-project basis and are not eligible for employment benefits such as health insurance or retirement plans. They are also not entitled to the same protections as employees under labor laws, such as minimum wage and overtime pay.

Businesses and organizations may choose to use independent contractors instead of employees for a variety of reasons, including the potential for cost savings and greater flexibility in managing their workforce. However, there are strict rules for determining who can be classified as an independent contractor, and misclassifying employees as independent contractors can have serious consequences for businesses.

In the United States, independent contractors are required to report their income on Form 1099-MISC, which is why they are often referred to as 1099 employees.