You can’t do it all yourself. Sometimes, you need a little help from your friends. Or, you need to pay someone to help you. This is where contractors come in. Employees are an investment. Usually, you hope they’re in it with you for the long haul. Contractors, on the other hand, present a more temporary arrangement. Still, there are many benefits to hiring contractors. There is a reason that so many talented and skilled professionals decide to offer their services to clients on a contractual basis. Many contractors see the perks of working for themselves, being their own boss. Though contractors are lone wolves, you’ll find that, as a small business owner, you have that certain entrepreneurial spirit in common with them. In most cases, for both client and contractor, business is good! As long as you pay contractors, this relationship should be a convenient, mutually-beneficial arrangement that will serve you both well.
How to Pay Contractors Quickly and Easily
Make sure they’re a contractor!
Whoa, there. First things first. Before you shell out any money, you need to make sure everything is on the up and up. This can get confusing. The person you’re paying may look like a contractor, talk like a contractor, and walk like a contractor, but unless they actually are a contractor, you could be in for a world of hurt down the line. Better to determine this ahead of time. The IRS has a whole procedure for sniffing out whether or not you’re dealing with a contractor. Determining this is where you want to start, and it’s not as easy as it seems.
Here’s a basic run-down of what the IRS is looking for to determine that you’ve indeed hired a contractor:
Contractors are not beholden to your company. They are free to work for other business, and they often do. In fact, contractors make money primarily by spreading their services around. You’re not their first, last, or only client. (Hot tip: One way to select the right contractor for your business is to look at how many other businesses they are serving. Too few, and you may be dealing with someone who is inexperienced. Too many, and you may not get the time and attention you need! If you’re going to pay contractors for services, make sure you’re a top priority!)
Are you setting the contractor’s hours? Are you determining not only when, but where and how they work? In some cases, this can get kind of murky. If you pay contractors to install rose bushes on your company’s property, you’ll want them to be working at your business location, not digging up petunias down the street. But generally, contractors are the ones who have control over when, where and how they work. (Starting to see those perks of being a contractor like we mentioned earlier, eh?)
Well, this seems sort of obvious, doesn’t it? This really is the crux of the matter, though. Contractors have contracts. These contracts are different from the contract an employee might sign to begin or continue employment with your organization. Look for the phrase “independent contractor” on the document. Clearly defining the relationship starts here. The contract provides you with any documentation or proof you may need.
Fill out that form!
You’ve determined you’ve hired a contractor. You have a contract that clearly defines their role in your company. Good job! Now, next steps. As a business, before you pay contractors, you must take care of one little, but important item.
As soon as the ink is dry on the contract, the next form you need to place in front of any contractor is a W-9. If they’ve been around, they’ll be familiar with this form, even if you aren’t. If you’ve hired any number of regular employees, you’re probably more familiar with the W-4. This form is like that, but different. This form is specifically for reporting any compensation that contractors receive. You are responsible for reporting the payments you give to contractors to the IRS. Your contractors are then responsible for filing and paying their taxes based on the income they’ve received in the form of payments from your business and any other business they may have served.
Here’s the easy part! When you need to pay your contractor for services rendered, PayWow is here for you! Simple go through our simple sign-up process, and you’re ready to issue payment(s), lickety-split! (That’s PayWow talk for really fast.) Seriously!
97 total views, 1 views today