Using Quickbooks: Determining Employees & Contractors
QuickBooks Pro is an excellent bookkeeping system that helps boost the growth of any small business. With just the power of a button, you can easily track your expenses, customize invoices, and run reports.
As QuickBooks lets you manage your employees and contractors separately, you must first understand the difference between their definitions. That is essential as it not only impacts your hiring process significantly, but it also plays a major role in the way you handle your finances.
If you are unsure whether your business works with an employee or a contractor, then this guide is for you. As a team of experienced QuickBooks experts that you can count on, we are more than capable and willing to help you learn more about entering employees and contractors into QuickBooks correctly. Here are some of the characteristics that differentiate employees from contractors:
Compensation
Employees and contractors are compensated differently.
Employees represent and work for the company, which automatically makes them part of the business and the payroll. Meanwhile, contractors, such as freelancers or self-employed workers, work as separate entities from the company. Unlike employees who are on the payroll, they are compensated based on the services they completed or the work hours they rendered.
Taxes
The company sends employees their W-2 form to disclose the number of their salaries and income taxes withheld. On the other hand, as contractors work independently, they are given a 1099 form. Instead of the company withholding taxes from their paychecks, contractors handle and take care of their own taxes, which is known as the self-employment tax.
Benefits
Employee benefits make workers feel appreciated, valued, secure, and satisfied. They show that the company cares for the well-being of their workers. These include health care, insurance, paid time off, flexible schedule, workplace perks, and more. On the other hand, contractors do not receive the company’s benefits package.
Equipment and supplies
Employers are responsible and obligated to care for the working environment and supplies of their workers. Because of this, they provide their employees with the equipment, tools, and supplies that are necessary and helpful for accomplishing their work. Meanwhile, contractors bring their own equipment and other things they need for completing their services.
The Bottom Line
When you are handling a small business, using a bookkeeping system, such as QuickBooks, is essential. Having a go-to accounting software will help you manage your finances better and run your business more efficiently.
Your business may hire contractors and employees for the same work or similar services, but you must first understand the difference between their definitions and determine the type of workers that you have.
When using QuickBooks, you can place your employees and contractors into separate categories. There are multiple functions and features in the software that assist you in making your payroll, tax, and other business processes easier and faster.
If you are not well-versed in using QuickBooks, there is no need to fret. You can always work with a skilled QuickBooks ProAdvisor or an experienced bookkeeper for assistance. Look for someone who can help you understand your financial position and empower your finances.
If you are looking for outstanding bookkeeping services in New York, then you can turn to us. Contact us to learn more about how we can help your business.