Misclassifying workers can cause tax woes

stress-depressed-businessmanFrom Cincinnati.com:

“Advantages of hiring an employee

• The hourly wage for an employee is usually less than what you would pay an independent contractor or freelancer for the same work because you are providing job security.

• As a business owner you wear several hats. You can delegate tasks to an employee on a regular basis or shift responsibilities in an emergency, which allows you to focus on growing your business.

• Having a trusted and efficient employee you can count on can provide the comfort and assurance you need to take a vacation or be out of the office developing business.

Disadvantages of hiring an employee

• You are responsible for paying and withholding taxes (Social Security and Medicare) from your employees’ salaries.

• Even though many benefits are not required, employees may expect you to provide benefits such as training, healthcare and vacation.

You must have sufficient cash flow to cover payroll on a regular basis whereas independent contractors are paid by the project or service.

Advantages of hiring an independent contractor

• You are not required to pay taxes, employee benefits or commit to a salary when hiring an independent contractor. In addition, you aren’t responsible for maintaining their training and/or professional licenses.

• If you aren’t satisfied with the work an independent contractor performs you simply don’t hire them again.

• If you have an employee who doesn’t work out, you may have to terminate them which can be uncomfortable and at times problematic.

• Contracting someone with a specific skill or service means you don’t have to train them.

Disadvantages of hiring an independent contractor

• You have less control over how and when they perform their tasks because they are running their business their way.

• Independent contractors take several jobs for a variety of clients so you may not get the one you want when you want them.

• Copyrights are owned by the independent contractor, unless they agree and sign a contract that states otherwise.

Understanding the difference between an independent contractor and an employee, as well as the advantages and disadvantages of each, will save you future headaches….”

Read the full story at Misclassifying workers can cause tax woes.

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