Monthly Archives: July 2013

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Your business is up and running and you’re finding yourself getting busy. You know you need morehelp, but you’re unsure if you want to hire an employee or bring in an independent contractor.  You might also be wondering the difference between the two. It’s very important to discern the status of these workers as that status makes all the difference for your company and your taxes.
1099
 We’ve compiled a list of the primary differences between the two and have listed them here for your reference. We hope you find it helpful as you decide which is best for your business.

  1. By law, you’re required to withhold taxes for an employee. These include Social Security and Medicare taxes as well as the unemployment taxes you’ll need to pay for an employee.  There are no such requirements for an independent contractor.
  2. An employee is obligated to follow the rules of the company about when they work, how they work, and where they work.  An independent contractor provides a service but is given little instruction about how or where to work.
  3. An employee rarely has the opportunity to hire people to work under him if the workload is too intensive, where as an independent contractor has that ability.
  4. An employee is typically paid an hourly wage or a salary with a specified pay schedule.  An independent contractor is paid for the service he provides in a lump sum.
  5. For an employee to travel or go above and beyond normal duties, you, as the employer must reimburse the employee for mileage or travel expenses.  An independent contractor incurs their own expenses as those are typically built into the fees for the project.
  6. Unless otherwise approved by you, an employee typically works only for you.  An independent contractor may work for many different people and/or businesses.
  7. For an employee, the employer is required to provide the equipment needed to get fulfill the job duties whereas independent contractors provide their own equipment.

Hiring an employee or an independent contractor comes down to a matter of preference. And there are many nuances to each of these factors. We recommend consulting an attorney for specific legal advice and guidance before proceeding.

Should you decide on independent contractor, be sure to check out the services we offer for filing the required tax documentation – a 1099.

Resources:
IRS
Legalzoom
MDC

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Hiring a Seasonal Employee: Know the Rules First

Rajeev blog photoIf you’ve got a business operating on limited hours, then chances are you’ll need to hire a seasonal employee. Before you hire, make sure you’re educated! You don’t want to hire someone and have to redo all of the paperwork or be responsible for the taxes you didn’t take out.
Here are some tips and tricks to help you out when tax seasons rolls around again.

1. Make all employees responsible for filling out the proper tax forms for their type of employment. If you have questions, the IRS and DOL have incredibly user friendly websites that can help you determine what forms you will need for each type of potential hire.

2. Seasonal is a time limit, not necessarily an employment status. Seasonal employees are able to work full time hours. You are able to utilize your seasonal staff for full time labor, as long as you comply with labor laws.

3. Within the Department of Labor, seasonal employees have the same rights as regular employees. You are still subject to wage laws with a seasonal employee. You don’t want to be responsible for an unfair workplace violation due to mistreatment of a seasonal employee.

4. Know the difference between a seasonal employee and an independent contractor. A seasonal employee is one who is hired into your company on a seasonal basis, for example: spring harvest season or the end of year holidays. An independent contractor is someone who works as needed for a company under terms specified in a contract or agreement.

5. Ensure that your seasonal hire is not surprised by the termination of their position at the end of their season. Avoid the snafu of wrongful termination by supplying your seasonal employee with clear cut terms and conditions regarding the basis of their hiring within your company.

All too often, companies can fall victim to tax complications as a result of hiring seasonal employees. Before hiring, do your research using all of the options afforded to you including the IRS and DOL websites. Don’t get caught up in complicated legal battles and owing taxes for employees that you under-taxed. As always the best offense is a good defense. Know your rights and know the rights of your employees. Make sure that you issue a form 1099-MISC at the end of the year to all your contractors, just like you would issue a W-2 to all your employees.

When it comes to tax time, contact us for assistance with your e-filing tax needs.

Sources:

http://smallbusiness.chron.com/ways-pay-seasonal-employees-13816.html

http://www.dol.gov/dol/topic/workhours/seasonalemployment.htm

http://www.optimum-solutions.com/payroll/part-time-seasonal-and-temporary-employees

http://www.moneythinking.com/2010/12/30/tax-tips-for-seasonal-employees/

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