Hiring independent contractors, consultants or freelancers
instead of employees can save you time, money and paperwork. But
if you treat a contractor as an employee, the IRS can (and will)
hit you hard with penalties.
Use the "Contract With Independent Contractor" to not only
come to an agreement with your contractor, but to help justify
your working relationship when the IRS comes knocking on your
door. The contract will list the details of the job to be
performed, while making clear that your contractor will receive
no fringe benefits, can work for other clients, will pay their
own taxes and so on.
Important to Know:
- No contract automatically protects you from the IRS -- if
you treat your contractor as an employee, so will the IRS.
- Use contractors who provide their own tools and supplies to
get the job done.