Hiring An Independent Contractor? How QuickBooks Online Can Help
Are you taking on a worker who’s not an employee? QuickBooks Online includes tools for tracking and paying independent contractors.
The COVID-19 pandemic created millions of self-employed individuals and small businesses. Whether they chose to, or circumstances forced them to, these new entrepreneurs had to learn new ways to get paid and to prepare their income taxes.
If you’re thinking about taking on a contract worker, you, too, will have to educate yourself on the paperwork and processes required to comply with the IRS’ rules for his or her compensation. It’s much easier than hiring a full-time employee, but it still takes some knowledge of how QuickBooks Online handles these individuals.
You’ll also need to make certain that the person you’re hiring is indeed an independent contractor and not an employee. The IRS takes this distinction very seriously. If you’re at all unsure of your new hire’s employment status, we can help you sort it out.
Creating Records for Contractors
Once new contractors have accepted your offer, you’ll need to have then fill out an IRS Form W-9. You can download a copy here. Employees complete the more detailed Form W-4 so that the employer can withhold income taxes correctly, but you won’t have to withhold taxes for your contract workers. They will be responsible for calculating and paying quarterly estimated taxes and filing an IRS Form 1040 every year.
You, though, will be responsible for sending them an IRS Form 1099-NEC (Non-Employee Compensation) every January if you paid them more than $600 during the previous year. You do not need to send a 1099-NEC to a corporation or to an LLC that is treated as a C Corp or an S Corp.