Most business owners will agree that selecting the right payroll solutions for contractors matters now more than ever. In the past two years, businesses have changed the way that they hire workers. The coronavirus pandemic has increased the number of people who work from home. Also, companies have on-boarded many more people who they classify as independent contractors.
Making sure your company selects the right payroll software is the first and most important step. However, you should also know how to use payroll solutions for an independent contractor. Below, we’ve outlined some of the most important tips to guarantee success with all tax and wage responsibilities.
Identify Your Independent Contractors
Make sure that you keep in mind that remote workers and independent contractors are not interchangeable. In fact, the Internal Revenue Service’s distinction will dictate how you use payroll solutions for contractors. Worker classification establishes if your company needs to withhold income taxes. It will also determine if your business withholds Medicare taxes and unemployment wages from workers.
You can ask yourself a few questions to determine who your independent contractors are versus your employees. They can include:
- Will the company assign them to a formal onboarding or training program?
- Will the company expect them to use specific tools or follow set guidelines?
- Do they need to work a certain number of hours on a weekly basis?
If you answer “yes” to any of these questions, you have not hired an independent contractor.
Know Which IRS Forms to Use
All companies need to know which forms to use and when to file them to the IRS. Payroll solutions for contractors will help you identify which forms you must file by certain deadlines. These forms will tell you what sorts of fees your company must withhold. They will also help your company determine the types of deductions the IRS will provide you. When filing for an independent contractor, you will file Forms W-9 and 1099-NEC.
- Form W-9: Instruct your independent contractor to fill out the form. They will provide you with their name and their Taxpayer Identification Number. You do not need to submit the form to the IRS. Businesses keep W-9 forms for reference and any verification purposes.
- Form 1099-NEC: Your company uses the form for filing non-employee compensation. You must submit the form to the IRS if you have paid a contractor more than $600 for their services during that year.
Why Use Advanced Micro Solutions
You can make your company’s work easier by finding good payroll solutions for contractors. Our payroll software works as an add-on module to our W-2 and 1099 Forms Filer. By using it for an independent contractor form, you can enter 1099 information by check throughout the year. The program also supports filing “Live” or After-the-Fact Payroll.
Using our payroll solutions allows your business to easily keep track of and organize forms for independent contractors. Our entry screen looks similar to an actual form. Also, you only need to enter the information for your workers once.