How Independent Contractors Can Make Your Easy Home Business Shine

Independent contractors are the backbone of many easy home businesses. They can help make your business run like gangbusters. But be careful. If you don't follow the IRS rules, you may end up with one big aching bill.

There are 2 top reasons why home business owners use contract workers. First, they are experts who get the job done quickly. Second, independent contractors save you from having to hire employees.

Employees are costly. Besides wages, there are taxes, insurance and benefits to pay. This is enough to take a big bite out of income. With independent contractors, you pay them by the project and that's it.

Using independent contractors looks like the way to go. There's only one thing:

You must follow the IRS rules or your business can get into costly trouble.

Let's look at the IRS rules. They tell us what independent contractors do and what they do not do.

Independent Contractors do the Following:

* Use their own tools and work in their own space
* Set their own schedule and work for more than one company
* Get paid by the project and send you an invoice
* Sign your independent contractor agreement outlining the project
* Hire their own assistants
* Show a profit or loss for their own business
* Work at their own pace and seldom work full-time for you

Independent Contractors do not do the Following:

* Take part in the day-to-day work of your company
* Quit the job before the project is finished (You cannot fire them,either)
* Receive an expense account or benefits from your company
* Do your company's paperwork
* Take instructions or training from you
* Do the work of an employee or work alongside an employee

Paperwork You File for Independent Contractors:

The paperwork you file with the IRS is relatively simple. For each contractor paid over $600, fill out Form 1099 and include the contractor's social security number or tax ID. The contractor receives a copy in January and the IRS in February.

This is What Breaking the IRS Rules Means:

Breaking the IRS rules can mean money troubles. The IRS will reclassify the independent contractor as an employee. If this happens, you end up paying back taxes, fines, penalties and interest. You may have to pay past benefits even if you do not pay benefits to your own employees.

Following the rules is easy, though. Include them in the contract your independent contractor signs. Treat the contractor as a separate business owner with his or her own job to do.

How to Find the Best Independent Contractors:

Many home business owners find top-rated independent contractors by asking other business owners for recommendations. Other ways of finding them is by asking around at trade shows. Leave your business card and get the word out you have a project to outsource. Also, get in touch with associations.

It is worth doing an Internet search as well. Post your needs at several free forums.

Before you know it, the independent contractors you choose will help transform your easy home business into a powerhouse. In the end, you'll be so glad you hired independent contractors.