Are you considering hiring an independent contractor? An independent contractor is not an employee of a specific company, rather, they do independent work for that company or firm, though some work for another individual. Independent contractors are considered to be self-employed, therefore they may be responsible for Self-Employment taxes. When services are controlled by an employer, then that person, business, or corporation is not an independent contractor.
When tax season rolls around, there are a few different tax forms you need to have prepared for your independent contractor. There are also a few accounting and bookkeeping software that can help you keep track of all your tax information. Continue reading to learn more about what you need for this year’s tax season.
Is Quickbooks Right For Your Business?
A popular accounting software program that many business owners select to maintain their own books is QuickBooks. This system offers small business owners a cloud-based accounting program that will provide your company with many features like business payments, income, and reporting.
QuickBooks operates entirely online but offers more than just basic accounting. It’s meant to help small business owners simplify the back end of running a business. Just about everyone would agree that QuickBooks is a great introductory system for new and small businesses.
Here are some Pros and Cons of choosing QuickBooks:
- Easy to use
- Accounts payable and accounts receivable
- Inventory and invoice
- Checks/credit processing features
- Provides direct online access
- Affordable price
- Free trial period
When it comes time to hiring independent contractors, there are a few forms that will be necessary.
Important Forms for Independent Contractors:
The first and the most basic form a company will deal with is the W-9. Once someone is considered an IC they will need to be provided with a W-9. It is used to gather correct information, such as the IC’s name and Taxpayer Identification Number (TIN). A TIN may be either a Social Security Number (SSN), or an Employer Identification Number (EIN). It is always recommended to keep copies of W-9’s for four years after filing in case questions from the IC or IRS arise.
A 1099-MISC is one of the most common tax forms for independent contractors. If you pay the IC, someone who is not a regular employee, more than $600 for the work done throughout one year, you must fill out a 1099-MISC. Also, a copy of the 1099-MISC must be provided to the independent contractor and the IRS by January 31.
A Written Contract
This is usually prepared by an attorney and will outline the job that is being completed. It is a way to record the requirements and expectations of each party before beginning the task. Typically specific dates, estimated fees, and overall results will be included. The contract may be terminated barring any violations. It is suggested that a written contract be drawn up for each IC.
Why choose Norton Financials?
Avoid any issues before, during, or after you hire an independent contractor. Our experienced professionals are here to help you with your bookkeeping and accounting needs. We understand the IRS requirements and will help keep you organized and prepared for tax season. Give us a call today at (201) 988-6806 to discuss your financial needs!