We often get asked, “Who should I hire?”. If you’re a small business that is experiencing growth and it's time to add to your team, what’s the right decision: Employee or Independent Contractor? There are many different laws, rules, stipulations, and tax requirements that can help you make decisions.
What does the law say?
If you’re considering hiring an employee or an independent contractor, be sure to check Common Law and Safe Harbor rules to see how they apply to your situation.
Common Law:
Behavioral - What control does the employer have over how, when, where, and even who does the work?
Financial - What financial responsibilities fall on the employer vs the worker? Who pays for tools and other materials?
Relationship - How do the employer and the worker view the business relationship? Is there a written contract describing roles and responsibilities
Safe Harbor:
Reasonable Basis - Are you following industry standards?
Reporting Consistency - Are you filing the same for the worker year after year?
Substantive Consistency - Are you treating all workers of the same situation the same?
The Pros and Cons
Beyond the laws and rules, there may be options that seem attractive for both situations to hire an employee or an independent contractor. Employees can provide more stable, consistent, permanent work but also require more of an investment with quarterly tax deposits and insurance benefits. Independent Contractors require less investment upfront but need more flexibility and freedom from the employer which can be a concern for security or client lists.
Tax Documents
Once you’ve decided on what type of worker you will hire, you need to ensure you’re filing the proper tax documents. Both situations require specific documents needed, even at the time of hiring. Do you need a W9, W2, 1099 or something else entirely?
Be sure to listen to the full episode for all the details on these important points! If you find this episode helpful, find us on YouTube and like and subscribe.
What’s Inside:
Mentioned In This Episode:
Modern CPA Online
ModernCPA - YouTube
We often get asked, “Who should I hire?”. If you’re a small business that is experiencing growth and it's time to add to your team, what’s the right decision: Employee or Independent Contractor? There are many different laws, rules, stipulations, and tax requirements that can help you make decisions.
What does the law say?
If you’re considering hiring an employee or an independent contractor, be sure to check Common Law and Safe Harbor rules to see how they apply to your situation.
Common Law:
Behavioral - What control does the employer have over how, when, where, and even who does the work?
Financial - What financial responsibilities fall on the employer vs the worker? Who pays for tools and other materials?
Relationship - How do the employer and the worker view the business relationship? Is there a written contract describing roles and responsibilities
Safe Harbor:
Reasonable Basis - Are you following industry standards?
Reporting Consistency - Are you filing the same for the worker year after year?
Substantive Consistency - Are you treating all workers of the same situation the same?
The Pros and Cons
Beyond the laws and rules, there may be options that seem attractive for both situations to hire an employee or an independent contractor. Employees can provide more stable, consistent, permanent work but also require more of an investment with quarterly tax deposits and insurance benefits. Independent Contractors require less investment upfront but need more flexibility and freedom from the employer which can be a concern for security or client lists.
Tax Documents
Once you’ve decided on what type of worker you will hire, you need to ensure you’re filing the proper tax documents. Both situations require specific documents needed, even at the time of hiring. Do you need a W9, W2, 1099 or something else entirely?
Be sure to listen to the full episode for all the details on these important points! If you find this episode helpful, find us on YouTube and like and subscribe.
What’s Inside:
Mentioned In This Episode:
Modern CPA Online
ModernCPA - YouTube