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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