What is 1099 contractor?

A 1099 contractor (or independent contractor) is a self-employed individual a business hires to deliver a result, named for the IRS Form 1099-NEC that reports payments to them. The business pays the agreed contract amount and nothing else: no employer FICA, no FUTA or state unemployment tax, no benefits, and no withholding. The contractor pays their own self-employment tax and handles their own taxes.

On paper a contractor is usually cheaper than an employee, but the business gives up control over how the work is done, and misclassifying someone who legally should be an employee carries serious penalties.