The future of work looks a lot different now than it did 20 years ago. The share of the U.S. workforce participating in the “gig economy,” or contractor work, rose from 10.1% in 2005 to 15.8% in 2015. Researchers estimate that the number of Americans working on-demand jobs could reach 9.2 million by 2021. This means the way you run your business – and the way you prepare taxes – is going to change.
The gig economy offers workers more flexibility, but it can also benefit small companies. In fact, your business will probably change depending on the type of 1099 work you need. The gig economy allows small businesses to scale their workforce up and down as needed to meet changing business goals. It can make your operation – no matter how small or large – more financially and productively efficient. In most cases, the gig economy offers essential flexibility to young companies.
When it comes to hiring contractors, the real question lies in how your accounting process will change. Contract workers comprise an increasing share of the American workforce, and it’s up to you, the employer-client, to figure out how to deal with a gradually diversifying selection of 1099 vendors. Luckily, you’ll have 1099 software from AMS on your side.
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How Diverse 1099 Workers Can Impact Your Business
Contracted workers offer flexible services to companies on an as-needed basis. In most cases, they’ll act as regular, albeit temporary, employees. But when it comes to end-of-year tax filing, the process will look a little different. Rather than sending out W-2s, those utilizing gig labor will need to send out the 1099-MISC. Like a W-2, this will show how much they were paid during the year, but you will only send it if they were paid at least $600 for their services during the year.
Sending out 1099-MISC forms is similar to the W-2 distribution process, but there is a crucial difference. Ideally, you’ll have had an employee with you for most, if not all, of the year, and all their personal information will be stored within your payroll system. This isn’t always true for contracted workers, who might have done a single day’s work for you at the beginning of the year, never to be heard from again.
So, how will you know where to send Form 1099-MISC? Do you remember the company, or the contractor’s name? Where did you put the receipt they gave you? And how will you know which contractors have crossed the $600 threshold?
Great bookkeeping is important for any small business, but it becomes necessary for those hiring contractors and other types of “gig” workers. Employers might hire dozens of contractors over the course of a year – from business consultants and freelance copywriters to a construction company if you finally decide to go for that office remodel. The trick to filling out the appropriate tax paperwork is to keep excellent records of their services. This is where a great accounting software becomes important.
How AMS Software Can Help
When hiring a selection of 1099 workers, you’ll want a central place to store information: the name of the company or individual, contact numbers and addresses, the type of service provided, the date the service was provided, and the cost of those services. This type of personalization does not come standard with most accounting software, but with AMS, it’s easy to add new payees as you hire contractors throughout the year.
Our tools make hiring 1099 workers easy, no matter how diverse the services they provide. We understand the importance of adding payees throughout the year in the gig economy, especially for small businesses who might need the financial flexibility. Managing 1099 payments and information is easy with AMS.
Don’t shy away from hiring contractors because you’re worried your accounting software isn’t flexible enough. Try our W2/1099 Forms Filer today and discover just how simple juggling 1099 workers can be.