Do I Need to Pay Taxes and Benefits When Hiring a Freelance Writer?

Are you thinking of hiring a freelance writer? Working with a freelancer is a great way to grow your business. However, many business owners overlook the potential of freelance workers because they are unclear about the payment terms. In reality, paying a freelance writer doesn’t have to be complicated. In fact, it should be easier and more affordable than hiring a new employee and putting them on the payroll, which is why freelancers are an essential part of the equation for many companies. The question that employers usually have about hiring freelance writers is what their responsibility is to pay taxes and benefits. Here are the facts about this common question.

Businesses do not pay taxes or withhold taxes for freelancers.

The great news for many business owners is that when you hire a freelance writer, you do not have to pay any kind of payroll taxes for them. You also don’t have to withhold any taxes from the payments you make to them. All taxes on income earned by freelance writers are the responsibility of the writer. When tax season comes around, freelancers pay self-employment tax, which covers the freelancer’s Social Security and Medicare taxes. These are the taxes that are normally paid by employers in the form of payroll taxes. Self-employment tax is in addition to normal income tax. Freelancers are both employees of their own businesses and employers of themselves. This means they have to cover all of the taxes associated with their earnings. For businesses, saving money on payroll taxes is one of the biggest attractions to hiring a freelance writer.

Businesses do not have to pay freelancers benefits.

This is another cost-saving boon for companies who are considering working with a freelance writer. The freelancer you hire is not entitled to any benefits, like insurance or paid vacations, that you offer to your staff. Thus, the savings of getting projects done without bringing on a new employee can be significant.

Note, however, that some companies choose to offer at least limited benefits to freelancers with whom they work on a consistent basis. These benefits can include everything from the use of a car or computer through the company to the opportunity to buy into an employee health plan. For freelancers, these kinds of arrangements are not the norm. If you are hiring a freelance writer in a specialized niche and need to attract capable writers from a limited pool, then offering some kind of benefit program for an ongoing contractor relationship can help you attract top talent. There is, however, no obligation for you to do so under employment laws.

You will need to keep your tax paperwork in order.

Just because you don’t pay taxes for freelance writers doesn’t mean that you don’t have to file any kind of tax paperwork. The tax form you use for freelance writers is Form W-9. Ask each freelancer with whom you work to complete Form W-9 at the start of your working relationship.

With the information you obtain from Form W-9, you will fill out Form 1099-MISC. This form is similar to a W-2, but it reports the money you paid to freelancers for their work. A copy of 1099-MISC will be sent to the freelancer; he or she will use it to file his or her own taxes. You will also supply your 1099 report to the IRS when you file your business’ taxes.

It is important to have these records for each freelancer with whom you have a working relationship. This is true even if you only work with him or her on a small project with a low budget. The money you pay may be a small amount to you. However, it represents a portion of the freelancer’s overall income that must be reported. Having a completed W-9 and a 1099 filing is also helpful if there is any future dispute over the nature of the relationship between your business and the freelance writer.

You can follow this model to hire freelancers who live outside of the U.S.

It is more possible than many business owners think to work with freelance writers who are not U.S. citizens. The majority of the legal requirements that are in place are for foreign workers who will live in the U.S. while doing their work. If you hire a remote worker who is not a U.S. citizen, but never bring them to the country for work, then you do not need to obtain visas or other kinds of clearance.

You will need to request that the foreign worker completes Form W-8BEN. This form verifies that the person is not a U.S. citizen and not working in the U.S. It establishes that the person is not subject to U.S. tax laws. They will be required to deal with self-employment income paid by you in accordance with their own governments’ tax rules, but it is not your responsibility. However, you should always consult with your business attorney about hiring a freelance writer who is not a U.S. citizen to ensure that no special circumstances apply to your case.

You should establish in writing that your freelancer is an independent contractor.

The key to ensuring that you don’t have any obligation to withhold taxes or offer benefits to a freelance writer is to establish a clear definition of your working relationship. Ask the freelance writer to sign a contract that acknowledges that they are an independent contractor and that no aspect of your working relationship suggests that he or she is an employee of your business.

By signing this contract, you also agree to treat the arrangement as an independent contractor agreement. This means that you cannot establish or monitor specific working hours. You cannot set working rules outside of deadlines and project specifications, such as word count and style. This agreement will prove the arrangement is not one of employment should there be any confusion in the future.

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