Making a purchase of payroll software for independent contractor services can solidify your business. The IRS requires that independent contractors pay their taxes differently than W-2 employees. After gaining experience, those who have worked as independent contractors for some time often get the hang of these regulations.
But what happens if you decide to develop your own independent contractor business? If you hire out additional help for your business’s contracting, you will need reliable payroll software. As an independent contractor, you should keep in mind what you did when you started working.
Verify Independent Contractor Statuses
Communicate with your workers early to make sure they correctly identify themselves as an independent contractor. The IRS outlines who constitutes an independent contractor. As a business, employers can only control the result of the independent contractor’s work. Employers cannot tell workers how to complete the work.
Make sure that you discuss it before purchasing payroll software for independent contractor. If both parties remain uncertain, you can file Form SS-8 with the IRS. The IRS will review the circumstances and clarify what you need to know. Verify your workers’ statuses sooner rather than later. If the worker takes tax deductions for work that is not truly contracted, the IRS will issue penalties.
Keep Records of All Expenses
Keeping a record of your independent contractor payments is crucial for a few reasons. The first reason is, you can better monitor your business’s growth or downturns. You also should keep a file of records to track deductible expenses. However, perhaps the most important reason to file payment records is it allows your business to prepare its financial statements.
Payroll is among the transactions in your business that can generate supporting documents. When looking into payroll software for independent contractor workers, you should keep the generated information accessible in your books. Make sure that you hold onto records for as long as you may need them. These can validate any deductions or income for tax returns.
Know the Differences
Paying and reporting for independent contractors differs from employees. Make sure you know what the IRS expects and does not expect from you. One example is knowing quarterly taxes. As an employer, you only pay employee taxes to the IRS monthly for employees. You do not pay the taxes to the IRS for independent contractors.
Why Use Advanced Micro Solutions Payroll Software?
Our payroll software works as an add-on module. Our software users who purchase the W-2 and 1099 Filer software can also purchase the payroll feature. Our users can use the module to submit payroll and non-employee compensation. You can also enter other 1099 information throughout the year by using a check.
Small business owners can benefit from our easy-to-use software program. Some businesses calculate “live” payroll. But those who need to play catch-up can also use the payroll software for independent contractor work to process “after-the-fact” payroll. Our program assists small businesses with organization, data gathering, and outlines all reporting requirements.