Whether you are an employee or employer, filling out the right forms can a confusing and stressful process. As an employer, you need to make sure you are classifying all of your workers correctly and giving them forms that correlate to their position. If you are working for a company, you need to know if you are a contractor or an employee. When working for a company, there are two forms you need to be aware of once tax season comes around.
If you are a salaried employee of a business, then you will receive a W-2 form during tax return season. A W-2 form summarizes what you earned throughout the year and the total amount of taxes that were taken out. The payroll taxes are then paid to the government through your employer.
If you are an independent contractor and get hired to do a specific job, you will receive a 1099 form during tax return season. Unlike a W-2 employee, independent contractors have to determine their own payroll taxes, and then they have to pay the sum on a quarterly basis. If you are an independent contractor, you can have work-related expenses deducted on your taxes. So on a 1099, you can deduct internet, travel and home office maintenance expenses.
Being an Employee v. an Independent Contractor
There are several differences to being an employee and an independent contractor, especially when it comes to benefits. As an employee, you have access to health and life insurance depending on your position at a company. Many employers will pay a portion of an employees insurance plan. As an independent contractor, you have to pay for your own insurance policies. Many companies help their employee saves for retirement, which includes providing 401k plans. Independent contractors have to save for retirement on their own. As an employer, it might seem financially beneficial to use independent contractors for your business. However, if you want to retain your employees, you should think about hiring some full-time employees.
PL Consulting Can Help You Plan Your Budget!
PL Consulting offers a diverse range of bookkeeping and other financial services. Each of our services is customized to fit the needs of our client and his or her business plan. Our team can help you with each step of your business from organization, to budget, to financial maintenance. We are located in Pikesville at 119 Old Court Rd Baltimore, MD 21208. Contact us at 410.764.3731 or email@example.com so that we can assist you with your bookkeeping needs.Posted on