Tax Issues When Hiring Workers

As your business grows, you may find yourself in the position of needing to hire help. This is an exciting turning point for any business but one that comes with additional filing, reporting, and other obligations. If you decide to hire employees, you'll have to deal with payroll taxes, withholding, and filing requirements with the IRS and the state. If you decide to use independent contractors instead of employees, you avoid many obligations that you would otherwise have as an employer, but you must know how to distinguish between an independent contractor and an employee or you risk problems with the IRS and the state over proper classification of your workers. You'll also want to know how to keep proper records on your workers in case the IRS or state ever decides to audit you.

Make sure you understand your obligations as an employer. You don't want to get behind on any payment or reporting requirements. This is an area that the IRS and other agencies pay attention to and the consequences for not keeping up with your responsibilities can be severe.