Independent contractors, also called freelancers, are people who are hired by a business to perform certain tasks or provide specific services as a nonemployee. Independent contractors are only paid for the tasks they perform for a business and so, they pay their own medical takes and Social Security. Many small businesses prefer to hire independent contractors other than hiring salaried employees in order to cut down on business expenditure. The benefits of hiring freelancers are many, including:
There are disadvantages too, in working with an independent contractor, which leaves many business people wondering who to hire between an independent employee vs contractor. An employer has for instance to be extra careful when hiring independent contractors. To avoid any problems, ensure that you check the credentials of every freelancer you hire, to ensure that they do not have any felony convictions.
From the definition contract employee, paying a freelancer is much simpler when compared to paying a salaried employee. Some freelancers prefer to be paid per hour, others per job and others per individual contract. An employer is not required to withhold any tax from the employee’s wages, nor pay for Social Security and Medicare and other employment taxes.
However, employers are required to keep a track of all payments made to independent contractors every year. Again, you are required to withhold taxes on payments made to freelancers if the freelancer has not provided you with their Social Security Number, their individual taxpayer number or their employer ID number. You could also withhold taxes on their payments if the IRs has notified you that the taxpayer ID number is incorrect.
From the definition of contractor vs employee, it is very clear about the advantages and disadvantages of each type of employee for a business person to decide on who to hire for certain services and their type of business.
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