As a small business owner, there usually comes a point where you are faced with the decision to hire an employee or continue to take care of things on your own. When your business grows, you are going to inevitably need help to keep growth happening. This can be done one of two ways, either by full or part time employees or contractors to help you fulfill orders and provide services. A questions that business owners are certainly going to face when they are choosing between the two is what the tax implications are for employees versus contractors. Mark Dicus & Company is here to talk about employees and contractors and what the difference is between the two.
Understanding the Difference Between Employees & Contractors
There are some key differences between employees and contractors when it comes to small businesses. We would like to point out some of the differences between the two.
– Employees: These are individuals that complete taxes by an employer who provides training and equipment to complete the job. These individuals work for one single employer who controls their schedules. Employees often are rewarded with health benefits, retirement accounts, and paid time off.
– Contractors: There are also individual contractors that often work for small businesses. The key difference between a contractor and an employee is that contractors work for multiple clients at once. They control their own schedules and will use their own skills, equipment and expertise to complete the job. Contractors will create their own invoices and will take care of all of their own tax liabilities. They also handle all of their own health insurance plans and any other business expenses they might have.
Differences in Taxes for Employees & Contractors
When it comes to employees and contractors, there are some pros and cons that come with both of them. Taxes are going to look quite different for the two groups.
– Employee Taxes: One of the biggest benefits of being an employee for a business owner is that they take care of paying half of your social security and Medicare taxes. These taxes are often referred to as FICA taxes. They will send off your taxes to the IRS and provide you with a W-4 at the end of the year that shows the taxes that you have paid and your earnings throughout the year.
– Contractors: As a contractor, you get your payment upfront. You don’t have any deductions or withholdings taken out of your earnings. However, this also means that you are going to be responsible for all of it at the end of the year. The IRS requires them to make quarterly tax payments throughout the year to help stay on top of any tax obligations they may have.
Bookkeepers, Accountants & More in Summerlin, North LV, Henderson, Lone Mountain Village & Greater Las Vegas, Nevada
As a business owner, taxes are a big part of owning and running business. You can turn to Mark Dicus & Company to help take care of your taxes and provide you with tax preparation services to help you grow. Call us today!