Hiring Independent Contractors ? getfitfinancial

Your business is growing, and you?ve reached the point where you realize you need help. Instead of going through the hassle and expense of hiring employees, a great solution for Solo Professionals may be to team up with other Solo Professionals who already do the tasks or functions you need. By hiring them on an Independent Contractor basis, you can potentially solve your workforce needs without adding to your payroll.

However, when hiring an Independent Contractor make sure you understand the criteria used to judge the status of a worker. Independent contractors are people who are considered to be in business for themselves. If you misclassify a worker, the results can be costly, resulting in significant fines and penalties.

The most commonly recognized assessment is the IRS?s 20-factor test. (Primarily, the decision hinges on the degree of control you exercise over the individual. For specific information on the IRS criteria, visit this website: http://www.irs.gov/businesses/small/article/0,,id=99921,00.html.)

Here are the most important things to keep in mind when hiring an Independent Contractor:

? DO draw up a contract for the exact services you are asking them to provide.

? DO make sure they have a current business license and carry their own insurance.

? DO know the IRS Rules regarding Independent Contractors to make sure their salary is not deemed employee income.

? Do keep track of their contract, business and insurance verification, and keep a written record of all payments made to them so you can itemize those on your tax return.

? Do ask your CPA for guidance to make sure the proper tax forms are signed and issued.

The most important THINGS TO AVOID when hiring an Independent Contractor include:

? DON?T assume if you pay someone on a 1099 basis they are automatically an Independent Contractor.

? DON?T tell the Independent Contractor when to show up and leave. You can specify a time frame for a contracted job to be completed, but you must avoid dictating their specific hours.

? DON?T dictate how the Independent Contractor does their job. The more specific direction you give, the more they can appear to be employees of your business.

? DON?T control the business aspects of their job ? such as purchasing of supplies, or reimbursing them for business expenses ? unless that is specifically addressed in their contract. Most Independent Contractors supply their own tools and materials, and include all job-related costs in their total price.

? DON?T provide Independent Contractors with any benefits associated with employment, such as sick pay, vacation pay, healthcare or retirement benefits. They are not your employees.

GET FIT TIP: Take advantage of hiring other Solo Professionals as Independent Contractors to help with workload needs. However, follow the IRS guidelines carefully, to make sure they aren?t considered ?employees.?

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Source: http://getfitfinancial.wordpress.com/2011/09/28/hiring-independent-contractors/

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