More information to help you as a business owner grow your business.
Enjoy this great guest post from Tina Martin.
How to Get a Tax Break from Hiring Freelancers
Businesses of every size regularly outsource tasks that they don’t have the permanent staff to handle or are not equipped to complete themselves. Hiring a freelancer is an efficient, effective and popular solution to common business problems, and it doesn’t seem to be slowing down.
In fact, about 34 percent of the entire workforce in the U.S. does freelance work, according toFreeTrain, and that percentage is expected to rise for the foreseeable future. The businesses that hire freelance workers are all benefitting from the situation—specifically, in terms of taxes. Here’s how you can get a break from employee-related taxes by taking on freelancers.
Find Experts at a Fraction of the Cost
First and foremost, the long-term costs of hiring a freelancer are far less than those of a full-time employee. By hiring a freelancer, your company avoids paying the hefty sum of employee benefitsand more,and finding an experienced, credible freelancer takes little effort and time these days.
Online job boards connect your hiring manager to remote staffingcandidates in a few clicks, no matter the field you’re seeking help with. You can easily find someone with a portfolio matching the level of work you need completed in administrative support, sales, marketing, design, web development and other departments. These boards can be free, subscription-based or in-between the two, but any expense is overshadowed by the savings you’d otherwise be forking over into an employee’s 401(k).
Wipe Away Payroll Taxes With a W-9
Payroll taxes are an added expense to the bottom line for companies, but they can be avoided by hiring a freelancer. There are ways ofreducing the amountof payroll taxes a company is responsible for at the end of the year, but the most cost-effective solution is cutting them out entirely by outsourcing and keeping a W-9 on file for each contractor.
AW-9is a form supplied by the IRS that businesses use to fill out a freelancer’s Form 1099-MISC at the end of the year, letting the IRS know exactly what was paid to the freelancer. The IRS then takes this information and uses it to verify that the freelancer did indeed pay the taxes owed.
Employers are responsible for payroll taxes when it comes to employees, but contractors are responsible for paying these taxes. Keep the completed W-9 and 1099 forms on hand just in case your business is audited. This is the best way to confirm who you hired and how much you paid. Cut yourself out of the equation and save money and time down the line.
Free Yourself of FICA
Every company splitsFederal Insurance Contributions Acttaxes with their employees, but they are also responsible for unemployment taxes for each employee as well. Finding a trusted freelancer to hire for specific, limited projects cuts both the FICA and unemployment taxes out of a company’s expenses.
Since freelancers are self-employed, businesses that work with them are not responsible for any federal or state unemployment taxes. So when you bring individuals to tackle jobs, you’re saving the company time and money instead of calculating and payingFUTAand SUTA taxes.
Save Time On Payroll and Taxes
Whenever payroll comes around, your company is responsible for accounting, reporting and paying taxes for every employee. However, hiring a freelance accountantsaves you or your human resources staff the trouble of doing these tasks every week, month and year.
Aside from the obvious expense — wages — for each employee, businesses must also prepare by showing the taxes withheld from paychecks for each one. Then, when the tax season rolls around, forms upon forms must be filed for each and every employee so the IRS can take over from there.
You know time is a resource and taxes are nothing to joke about. That’s why working with freelancers to accomplish things you couldn’t alone is a smart business decision. And since freelancers come with tax perks, you could end up saving money in the long run.
Life Coach and Creator of Ideaspired.com