Employers Take Caution
As an employer you may have many different types of people work for you. When it comes to how you classify them for payroll, the name can be important.
Employee: a worker with a set number of hours, tasks, and works directly under your company guidelines. These people are paid at regular intervals and payroll taxes apply to both the employee and employer. They are issued a W-2 at the end of the year.
Independent Contractor: a worker that does work for you but they are their own separate business. They have their own supplies for performing the tasks needed and set their own hours. They also have several people they do the same work for as they are doing for you. These people are paid usually when the work they perform is complete and no payroll tax is paid by the employer. They are issued a 1099 at the end of the year.
From these two distinctions, an independent contractor sounds like the best and most cost efficient way to get work done. However, the government has a very close eye on businesses with an abundance of self-employed workers. Because you as the employer are not paying any tax on the independent contractor, the government wants to make sure that the proper classifications are being made.
If you have any questions about the proper steps to take or your business books, call Janine’s Bookkeeping today at, (609) 910-2300.
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