Are you thinking about hiring the first employees for your small business? Or maybe you need to hire additional employees to help with specific projects needs? Before you take on the costs of hiring permanent employees, as well as the tax implications, there may be a better option for getting the help you need without the unnecessary expense: Hire freelance workers instead. The freelance economy is more popular than ever these days, and that’s because small business owners and corporate hiring managers have wised up to all of the financial perks that can be had by using contract workers, as opposed to bringing on full-time staffers. So if you’re interested in these tax and financial benefits for your business, here are some basics you need to know:
Finding Freelance Help is Easier Than Ever
Before we get into how freelance workers can benefit your small business, you need to know where to find that expert help. Thankfully, sites like Upwork make it extremely easy for small business owners to find freelancers who can help out with a variety of small business needs, no matter how big or small. Job boards like Upwork allow you to search for potential candidates and easily connect with them, so you can get help with your business projects quickly. So what kinds of tasks can freelance hires help out with the most? AllBusiness suggests a few freelance pros who may provide the most benefits to your business’s success. Experienced writers, IT professionals, and project managers top the list, and getting temporary help with these projects can be much more economical than hiring new full-time staff members. You can also use gig workers for less complicated business needs, like managing your schedule or helping with administrative tasks. Freelance virtual assistants can provide all of these services, and much more, without the added hassle of hiring a regular, full-time employee.
Paying Freelance Workers Can Be Simple
Okay, so now let’s dive into all of the ways that hiring contract and freelance employees can help your business save time and money, especially when it comes to payroll and taxes. First of all, as long as you properly classify contract employees, you should be able to steer clear of potential issues and problems with the IRS. This may mean asking for a determination from the IRS or answering required questions, but even these steps require minimal effort. You can pay these freelance workers by the hour or per project, which reduces the time needed to account for other payroll details, such as federal withholdings and employment taxes that you don’t need to account for payments to freelancers. Not having to account for these finer payroll details is one of the perks of hiring freelancers for your small business, but there are others you should be aware of as well. Freelancers typically use their own equipment when working on projects for your business, and they only work when you really need them, so your project costs stay low.
Hiring Freelancers Can Require Less Effort
Adding new permanent employees, as opposed to freelancers, can come with some added tax costs for your small business. When you hire a full-time or part-time employee, not only are you committing to paying their annual salary or hourly wages each pay period, but you are also responsible for ensuring that expenses like Social Security, Medicare, and worker’s compensation are covered for those new employees. You also need to take the necessary steps to take out appropriate taxes, like state, federal and Social Security, all of which can take more time and effort on your part. That can mean spending countless hours filing the proper forms, and spending time on that extra tax paperwork can really take away from your productivity. That can be a disaster for busy small business owners who are already pressed for time. Avoiding these extra costs is just one of the ways businesses can save money by using freelancers. Rather than constantly having to account for these employees, you can hire them as needed and avoid any extra paperwork or onboarding expenses required for tax purposes.
Avoiding Benefit Costs Can Be an Added Perk
When you hire full- or part-time employees, certain employee benefits may also be required. As the hiring business, you may need to offer FMLA, unemployment insurance, and other benefits in order to legally operate in your state and maintain your current business status. In addition to required benefits, paying for health plans and retirement benefits is generally a must if you want to attract competitive candidates. The costs of health plans for small business owners are dependent on the size of the company, which means that hiring more regular employees could result in additional expenses for your company. Small group health insurance is generally cheaper than individual plans, but keep in mind that the average monthly premium for the former is $409 per person per month, with an average yearly deductible of $3,140. If you want to hire full-time workers, you really should offer health insurance, in addition to other benefits. So if you want to avoid these added costs and still help your business succeed, hiring freelancers may be your best bet for help.
Filing Taxes With Freelance Help is Super Simple
So by now, you know that hiring freelancers and gig workers can result in fewer upfront tax hassles and expenses for your small business. When it comes to actually filing taxes for your small business, however, using contract workers can have some major benefits as well. In fact, as long as you provide the proper 1099 forms to your freelance workers and report those payments to the IRS, you don’t have to worry about taking any additional steps on your annual tax return. Freelancers file their own taxes each year, which includes paying federal or state taxes and reporting their earnings on their tax returns, just like anyone else who is self-employed. Self-employed individuals are also responsible for paying into Social Security and Medicare, as well as looking for ways to lower their tax burden each year. It’s helpful to understand these tax steps yourself, especially if you are the sole employee of your small business. Those same simple tax rules will apply to your return as well, which means you can take less time and effort when it comes time to file your taxes.
When you are trying to make the most of your business profits while managing your business projects, freelance workers could provide the boost you need. Finding and hiring freelance help is so much easier than searching for full-time employees and bringing them on board with your company. Plus, dealing with tax requirements can be much simpler as well, as there are only a handful of tax steps and payment measures you need to worry about in order to employ freelance workers for your small business. In addition to saving money and resources by having fewer payroll and tax requirements, you can also save yourself some time. Since time is so precious to small business owners, that may be the best benefit of all!
Written By: Tina Martin
Tina stays busy as a life coach and works hard to help herself and her clients achieve a healthy work-life balance.
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