Guide to Freelancer Payments: How to Draft Contracts and Collect Tax Documents
As the gig economy grows, more businesses are utilizing the specialities of freelancers across the globe. However, managing a remote team of independent contractors can be difficult without a solid foundation of best practices.
Publishers who work with journalist contractors, regardless of where they’re based, should be aware of the varying ways to pay freelancers and ensure tax compliance. Onboarding and paying freelance journalists is different from traditional employees, or W-2 workers. The accounts payable process for onboarding freelancers requires a specific workflow. Businesses that work with journalist contractors need to have a signed project agreement, tax documentation for the IRS, and outlined payment terms.
In this guide, we’ll help you understand how your business can pay journalist contractors easily with tax automation.
What to include in freelancer contracts
Before sending off your business’s typical independent contractor agreement, first confirm the freelancer is correctly classified. After, be sure to collect relevant tax information and outline payment terms.
Classifying workers: Contractor vs freelancer
A freelancer is an individual who is self-employed and works either autonomously or remotely. Freelancers have a wide range of specializations and are typically hired on a short-term basis for a single project or assignment. Freelance journalists price their work in a variety of ways — hourly, project-based, or by word.
On the other hand, contractors usually devote their entire working time to a single client when assigned a project. Some businesses classify freelancers and contractors the same — as they are both 1099 employees and are not employees. While others choose to define contractors as repeat workers as on retainer, or on call.
In short, classifying freelancers and contractors correctly will help your business when collecting tax information and crafting a contract.
Outline payment terms for journalist contractors
Freelancers and contractors usually set their own rates when it comes to specific assignments. This is why it’s important to lay out payment terms before a contract is presented. Do you want to pay the freelancer upfront? At the end of the project? After the last round of edits? Or via milestone payments? These are important questions to hash out with the freelancer while crafting a contract.
Collecting relevant tax information from freelancers
If you’re working with a freelancer or independent contractor within the US, the IRS requires businesses to have a signed W-9 from the worker before work is started. Although freelancers are required to pay for their own taxes and benefits, the W-9 form is what classifies them as independent contractors in relation to your business. On the other hand, any freelancer paid more than $600 from a business is required to receive a 1099 from the client.
Before work begins, ensure the freelancer has executed and signed a W-9 form. If the freelancer moves, changes their name or business address, be sure to inform them that it is their responsibility to update their W-9 form.
How to pay journalist contractors with tax automation
If your business uses OutVoice, every new freelancer can be required to digitally sign your company’s contract agreement, complete a W-9 form, and enter their relevant bank account information during onboarding. Cut down back-and-forth processes to a single click — OutVoice automates onboarding, invoices, W9s, 1099s, and freelancer contract management. To learn more about how your business can pay journalist contractors with tax automation, schedule a demo.
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