Hiring the right independent contractor can be hard. The benefits to your company are obvious, but what can you do to ensure you are attracting and building loyalty with the right talent? Sure, you can pay your independent contractors more money than their W-2 counterparts, but there’s more you can do to help ensure your 1099 contractors are focused on the work and not on the administrative hassles of owning a business.
A lot of what it is to be an independent contractor is running a business. Most don’t get to go home at the end of the day and leave work behind. No, quite often when they go home and have the other half of their job waiting for them.
Tracking expenses, logging them into their books, generating business, ect. Add the issues of quarterly estimated tax payments, entity formation, tax returns, and that makes for one very distracted contractor.
What if you could offer your independent contractors a tax service that provides a turn-key solution to their tax compliance burden, saving them time, headache and thousands on taxes? A service like that would certainly set you apart from other companies and show a progressive attitude toward independent contractors, don’t you think?
Here’s what an average independent contractor needs to go through in order to open and operate their business:
Entity formation
They need to figure out what business structure would work best for them, often researching online for what the best option would be. If you’ve spent any amount of time online, you’ll know there’s no shortage of advice, but very rarely is it good advise. So they often make misinformed decisions regarding their business entity, which ends up costing them significantly in taxes.
Bookkeeping
They need to figure out how best to do their bookkeeping, which means, they usually find the biggest shoebox they can find to store their receipts in. Most people aren’t experts on what makes an expense tax deductible, so they will be losing money on deductions year after year.
CPA
Not all CPAs are created equal. On average a consultation with a CPA will cost an IC anywhere from $100 to $250 per hour. Because of this, most independent contractors only meet with their CPA at the end of the year. When running a small business, it is imperative that they speak with a CPA regularly to ensure they are keeping all their compliance responsibilities, as well as maximizing their deductions and tax savings.
You can view an infographic about helping your independent contractors here
At IC Tax Advisors, we take on the majority of their tax compliance burdens by providing the following services:
Entity formation
By structuring their business properly, we help clients save thousands on taxes. For instance, by forming an LLC that elects to be taxed as an S corporation, they are able to shield a portion of their income from self-employment taxes, by paying themselves a salary in the form of w-2 income. The remainder of their income is then converted into tax efficient dividends.
Bookkeeping
Clients work with a personal bookkeeper to oversee, track and record business expenses. Bookkeepers also function as a resource to answer questions they may have about business deductions, helping determine what is deductible, and the most beneficial manner in which to apply deductions.
CPA
Clients are assigned a personal CPA to advise them on their business, and financial matters. They will oversee payroll, dividends, bookkeeping, etc. Our CPAs provide ongoing advisement to clients about new opportunities to save on taxes, as they present themselves.
Independent contractors enjoy a flexibility that their W-2 counterparts do not benefit from. Because of that flexibility, we are able to advise clients on various other tax strategies to help lower their taxes even further.
For example:
Solo 401(k)
Contribution limits to a 401k retirement plan, as an independent contractor, top out at $53,000 whereas the contribution limit of an employee are $18,000.
Paying your kids
Small business owners are able to generate tax free income, by paying their children wages from their business. This involves a special process with its own compliance standards.
Plus many more personalized tax reducing strategies.
By referring your independent contractors to our services, you will increase your talent retention by helping them save them thousands in taxes and demonstrating that you care about their financial well-being. As they say, your workforce is your business’ most important asset. Click here for the infographic Contact us today at 888-959-2829 or partners@ictaxadvisors.com to find out how you can partner with Independent Contractor Tax Advisors!
Tags:
bookkeeping,
business,
corp to corp,
CPA,
entity formation,
helping 1099 contractors
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