Like most businesses, cleaning services face this same decision. Which option is best? Haven’t a clue what the difference is, let’s make it a point to quickly touch on it.
When you hear keywords like, 1099, contractor, or independent contractor, you should know that they all mean the same thing. This is someone you are hiring for a specific task for a limited time. They will typically either be self-employed or outright running their own business. When you hire an independent contractor you don’t have to worry about various things, such as, taking taxes out, paying unemployment taxes, dealing with worker’s compensation, or dealing with health care benefits. What this does is that it leaves you with more money in your business pocket.
Downside to Contractors:
Now the downside, and what to keep in mind is that you have less control of things. With a contractor you are basically hiring them to complete a set of requirements that you outlay, however, you can’t force them to do things in a certain way or use certain techniques. Let’s take a look at an example:
You start your maid service and want to hire a contractor for a cleaning job you just got. Great, this is what you can do, provide a cleaning list which is what results you want from the contractor. You can specify when it needs to be done and the starting time. Now, what you can’t do with an independent contractor; dictate when they take a lunch or break, dictate how they should clean the tub, or dictate what should be done. You can only specify what outcome needs to be obtained or results you want. Also, note that although you don’t have to worry about taking taxes out for the contractor you do have to provide the contractor with a 1099 tax form if you pay them more than $600 (as of 2016).
Benefits of Employees:
Now here is the benefits and cons of going with employees. With employees you can put them through training to exemplify how you want things done. You can specify specific cleaning supplies that need to be used. You can specify when lunches or breaks are. Basically, you get a lot more control over and can state, what will be done or how it will be done. This can provide a more consistent standard for your customers. Now the cons of going with employees versus a contractor is there are a few things as an employer that you will need to do.
-Have them fill out a W-4 to know how much withholding tax to withhold.
-Verify their eligibility to work in the US.
-You need to pay un-employment taxes to the government.
-Don’t forget to carry worker’s compensation.
-You might be required to provide health insurance.
-Make W-2’s for your employees.
-Typically you pay half of the social security and the employee pays the other half.
Keep in mind no matter what you decide to do for your cleaning service that if you start treating them as employees, but don’t take the necessary steps the IRS can come back with some fury. This is general knowledge and one interpretation of the US tax law. Please always consult a professional tax planner or accountant. We will not be held accountable for any actions you take. Continue learning from the links below.
Sincerely Your Friends,