The number of freelance workers, or independent contracts, is on the rise. According to The Freelancers Union, over 57 million Americans (36 percent of U.S. adult laborers) worked as freelancers in 2017 and within the next decade freelancers will make up the majority of the U.S. workforce.
Having a workforce containing freelancers holds both benefits and drawbacks. Freelancers with more specialized skills demand a higher rate than a full-time employee but add a flexible and skilled work team to be utilized only as needed. Costs are reduced with no need for provision of benefits and training programs.
The IRS has special rules for classifying an individual as an employee versus a subcontractor/freelancer, usually considering most workers to be employees. The U.S. Department of Labor has rigorous standards on freelance status and also works aggressively with the IRS and state agencies to avoid incorrect classification. This results in a laborious process of documenting the activities of freelance contractors.
"Also, to note, in 2018 The IRS has eliminated automatic 1099-MISC and W-2 extensions for 2018. With the new rules all reporting has to be done by January 31st, 2019. Each late form comes with a fine ranging from $100 to $260. USA Payroll can help – call us at (856) 665-5600 to put a plan into place and avoid the late penalties. We help companies prepare the necessary forms to be sent to the freelancers to remain in compliance with the IRS regulations.