| By :
Kristin Gabriel
Fundamentally a business owner should know all the details about hiring people as independent contractors versus hiring them as employees. If you are a small business owner you may hire people as independent contractors or as employees, and the IRS has rules that will help you determine how to classify them. It's important because this will affect how much you pay in taxes, and whether or not you need to withhold from your workers paychecks. There are a number of factors for a small business that can make it easier if you have paid contractors. One is cash flow. Businesses are now using invoice factoring to make sure they have the funds each month to cover payroll to employees, while others use contractors, and may need to employ invoice factoring to cover their invoices. Another area where invoice factoring can come in handy is covering quarterly or annual tax debts. Following are some key points business owners need to understand: The IRS can tell you whether a specific individual is an independent contractor or an employee by filing a Form SS-8, Determination of Worker Status - this is for purposes of Federal employment taxes and income tax withholding with the IRS. The IRS uses several characteristics to determine their workers businesses relationships: 1. Behavioral control determines who controls how the work is done. 2. Financial control determines if a business has the right to control the financial and business aspects of a worker's job. 3. The type of relationship determines how the employees and the business owner perceive their relationship. A worker is likely an employee+--if you have the right to control what is to be done, and how it is to be done. Workers can avoid higher tax bills and lost benefits if they know their proper status. Employers who misclassify workers as independent contractors can end up with substantial tax bills. Additionally, you as an employer can face penalties for failing to pay employment taxes and for failing to file required tax forms. In the event that this happens to you and your business, remember that you can always use invoice factoring and factor outstanding receivables via a factoring company, and get the cash fast to pay your tax debt. Today there is even something called "spot factoring" which enables the factoring of one invoice at a time on an as needed basis. Spot factoring is of benefit to firms that do not get paid for 30, 60 or 90 days. Many factors don't expect to buy 100 percent of a company's receivables, and there are no minimum or maximum sales volume requirements for accounts receivable factoring. After the factoring company has reviewed the creditworthiness of your customers, funding can be provided within as little as 24 hours.
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