How to Tell If Your Independent Contractors Are Actually Employees

For some of your business tasks, working with an independent contractor can be win-win. You have fewer tax responsibilities and paperwork, and the contractor has greater freedom and flexibility. But in many cases, business relationships get closer than they were originally intended, and you may begin to ask yourself just how “independent” your contractors actually are.

The rules around what makes workers independent contractors vs employees can be confusing. But they are also important; incorrectly treating an employee as an independent contractor can cause real problems and be costly for your business if you are audited. In this post, we’ll walk you through the distinctions between the two, so that your business can make the right decision.

Misconceptions About What an Independent Contractor Is

Most businesses find independent contractors more attractive as an investment than employees. They are generally less costly and more convenient, both of which can be important factors in a small business environment. But even if you and your worker agree to an independent contractor relationship, that’s not enough. Here are three common misconceptions about what can allow you to hire an independent contractor:

  1. Small Employers
    A very small business can find it difficult to pay the taxes and insurance costs associated with hiring an employee. Calling the worker an independent contractor can seem like the perfect solution, but neither the IRS nor the US Department of Labor considers the size of a company to be a factor.
  2. Infrequent Work
    When a job is only performed a few times a month, it seems counterproductive to go through the hiring process. After all, the worker can’t possibly qualify for benefits! However, if the work falls under the parameters of an employee, then it doesn’t matter how frequently it is done.
  3. Temporary Job
    Sometimes your business will have a task that needs to be done just once. For example, your business could have disorganized financial books; working with a bookkeeping service in Atlanta can be the right solution. A job like this is often handled by an independent contractor, but it’s not the temporary nature of the job that makes it non-employee work.

These three scenarios mark times when independent contractors are often used. But as you can see, that doesn’t mean that an arrangement under these criteria actually is legally an independent contractor agreement. Instead, you have to pay attention to three specific rules set out by the IRS to ensure you’re not overstepping their boundaries.

What Does Matter?

The distinction between independent contractors vs employees really comes down to the behavioral, financial, and relationship components.

  • Behavioral
    The behavioral aspect is about control. Who assumes responsibility for the training and specific direction of the work? Does the worker have to work during set hours, at a set location, on specific equipment? If all of these factors are controlled by the employer, there’s a good chance that the worker is an employee.
  • Financial
    The financial aspect is about the worker’s control over their profit or loss on the job. Independent contractors are more likely to work for a flat fee or hourly rate determined by their ability. They also control their investment in the job, any unreimbursed expenses, the method of payment, and have freedom to pursue business opportunities outside of the employer’s company. The more of these factors which fall under the employer’s control, rather than the worker’s control, the more likely it is the worker is actually an employee.
  • Relationship
    The relationship component is all about how you and your worker have defined your agreement, in addition to a few extra factors. The relevant criteria include written contracts, employee benefits, and types of services that the worker is required to provide.

The U.S. Department of labor evaluates “economic realities” including

  • How much the work is controlled by the employer
  • Who invests in the equipment and facilities where the job is performed
  • The extent that the worker can control their own profit or loss on a job
  • How much control the worker has on how a job is done and their power to make entrepreneurial decisions
  • The permanence of the job and whether or not it is comparable to the work of employees in the company.

This article can help you decide what to call your business relationship. Sometimes, however, an engagement can be right on the blurry line in between the two. In this case, either calling a lawyer to review it can be helpful, or making changes to your relationship to make it more obvious that you are in an independent contractor engagement can be a good move.

If you can’t move further towards an independent contractor relationship, then perhaps it’s time to bite the bullet and make your worker an employee of the company. If there is a doubt, it may be best to just hire the worker and call them an employee. Although there will be additional costs in the area of employer social security, medicare, and unemployment taxes, you will avoid the steep penalties of getting the distinction wrong in the eyes of the IRS.

Everything You Need to Know About Switching to Quickbooks Online

With the cloud making all types of computing so much easier and more convenient, it’s no surprise accounting software has made the leap to the cloud as well. Accounting software giant QuickBooks is no exception, and while they have made the migration online, many users are still offline, using traditional versions of the software. Whether you use a bookkeeping service Atlanta trusts or doing your accounting in house, these developments may be of interest to you. If you think your business is ready to make the shift to the cloud, this article can help you to prepare.

The way accounting software conversations have been trending, you’d think that QuickBooks Online was the only version available, with desktop versions all but retired for good. However, this is far from the case.

A quick visit to the QuickBooks website will show plenty of energy, connections and references still being given to the “old” QuickBooks. Desktop versions like Enterprise, Pro, and Premier are still there, albeit a little harder to find on the site than they once were. Yes, you do have to dig a little bit to find them, but they are still there.
The Future of QuickBooks?
So what’s in store for QuickBooks and QuickBooks users? Some desktop version users are genuinely worried that the Intuit company is moving away from the more robust desktop versions of its QuickBooks software and will neglect their business needs in the process.

The truth is that Intuit is placing its focus on online and mobile versions and has stated as such at a number of recent conventions and conferences. Their overall ecosystem and expenditure of development resources definitely points in this direction.

However, Intuit insists that they will not be leaving their desktop users out of the equation in the near term. They say they are still creating desktop versions of their accounting software and will continue to provide support for them in the foreseeable future. This isn’t enough for some businesses to rest easy about the future of desktop accounting, but it is a short term comfort at least.

That said, it does appear that at some point the desktop side of QuickBooks will eventually be usurped by the online wing. How long this will take, exactly, is hard to say. However, the Intuit company is already giving priority to its Pro Advisors who are certified in their online solution.
Desktop vs. Online and Mobile
While some larger businesses are simply too big to make use of the online version of QuickBooks and must stick to Enterprise, smaller businesses are moving to try QuickBooks Online in droves. The ability to manage accounts on the go in real time is simply too good to resist by many small business owners who need to keep close tabs on things like cash flow, payables and receivables.

Which version is better – Desktop or Online? Not surprisingly, the answer amounts to: “It depends.”

For example, businesses with no experience with desktop versions of QuickBooks tended to really enjoy the round the clock availability of the software and all its features from day one. No updating or upgrading is generally needed. QuickBooks’ mobile capability and AppCenter are loved by most users, and the overall functionality is a fit for most small business needs.

Other businesses that try the online version first find that QuickBooks Online is simply not robust enough for their particular business needs. These business owners end up moving to a desktop version of QuickBooks or other software alternative.

By contrast, businesses with some QuickBooks desktop experience that move to the online version have a different experience; while many are glad they made the change and love the nimbler, on the go feel of the application, others report that they wish they could go back to the desktop version. For some businesses, the software simply isn’t meeting their full needs like the desktop version they had grown accustomed to. A percentage of businesses actually express deep regret over making the change and wish to migrate back to the desktop product as soon as possible.
How to Decide?
Desktop vs. online? For many small businesses, it’s probably safe to make the change. There are a number of benefits to doing so, including 24/7 access to your books, real time information, and access to a host of apps that expand/enhance the functionality of QuickBooks Online. Start by creating a list of your business needs and requirements, then check out the available versions of QuickBooks to see how they match up.

Lastly, make sure to take a test drive of your chosen online version of QuickBooks before committing to it. QuickBooks allows users a free trial with no credit card required, allowing you to get a feel for its features, functionality and whether or not it will be a fit for your business. Consider also signing on with a bookkeeping service Atlanta knows and trusts so that your comprehensive accounting, bookkeeping, and QuickBooks needs will be taken care of.