5 Reasons Not to Hire a FreelancerAdmin
35% of the entire US workforce is made up of freelance workers (according tofreelancersunion.org). Freelancers can be a great asset for companies, but hiring freelancers can be very risky.
Below are a few considerations to take into account:
1) IRS Violations. Freelancers are categorized as 1099 employees. According to the IRS Factor Test, many 1099 workers are not properly classified. If the IRS finds that a 1099 employee is actually a W-2 employee, you will get hit with a large tax bill for employment taxes and fines. Uber is currently fighting classification of its 1099 employees.
2) No Workers Compensation insurance coverage. 1099 workers do not qualify for workers compensation insurance. If a freelancer gets hurt while working on a project for your company, you may be paying out of pocket for their health expenses.
3) Accidentally filing for Unemployment. After an assignment is over with an independent contractor, they may try and file for unemployment. This can cause concern at the unemployment office and may cause your company to be audited.
4) Background checks. Workers that are considered independent contractors and not employees do not have the same screening process that W-2 employees have. If you are giving background checks, interviews, personality testing, you may be crossing the line between a freelance worker or an employee of your company. If you hire a freelancer, you may need to roll the dice and not complete a background check.
5) Taxes owed to IRS. Taxes are not withheld for 1099 workers. 1099 workers must pay their taxes at year end. Although, this can be a problem if your 1099 employee does not pay their taxes. You may be responsible for their tax bill.
Each of these issues can be solved by hiring a freelance worker as a temporary W-2 worker instead. Call us and we will show you how.
Please be aware that this blog is not intended to be used as legal advice. Please consult your attorney if you have questions about hiring freelance workers
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