What are the tax implications of hiring remote workers?

The Covid-19 pandemic sparked the era of remote working. Sure, remote working has increased in recent years. But the all-encompassing global pandemic got things going in full swing and overnight we moved to remote working.

The first part of dealing with a completely removed setup was the technological infrastructure. We all remember the Zoom calls from the first few weeks, don’t we? But we quickly adapted to the needs of the unprecedented situation. Our remote work tech stack is more or less sorted out now.

But then something came along that we hadn’t really thought about – the tax implications of remote working. Taxes are a pain now to have to figure them out under normal conditions. Under the pressures of a pandemic and such a difficult time as a business, it’s a nightmare.

Before the pandemic, most companies would not have spent time thinking about the tax implications of hiring or working remotely. Why should they if it wasn’t needed? But this lack of preparation surprised us.

Taxes and Non-Governmental Employers

During the tax season, companies and employers realized that there were new tax rules to consider. Many employees moved from their office location to their hometowns, often in a different state. With different tax regulations for federal, state and local taxes, the calculation is a headache.

If you have an employee who works in a different state than where you normally do business, your tax liability is based on whether you are “doing business” in that state. The tax laws for this are different for different countries. In some cases, having only one employee in your state may be considered a “business” and you would also need to follow that state’s tax laws.

Generally, “doing business” in a state is defined by the idea that the business is subject to the income tax laws of a state and is applicable to the sales it makes in that state.

Some relief was announced that employers with a remote workforce contracted by the pandemic would be exempt from such tax laws. However, this is only temporary. Sooner or later the compliance requirements will come into effect.

Remote work will also be part of the way we work from now on, even after the pandemic. With that in mind, the tax implications and compliance regulations present an impending hurdle waiting to happen.

If you have a remote workforce based in different states, you may encounter unexpected tax charges. This would mean assessing each state’s tax policy and determining what tax implications and liabilities you have for each state.

If tax compliance is taking up some of your productive time, when will you be working on growing your business?

Employee or independent entrepreneur?

The fundamental difference between the two roles is clear, but the tax and compliance rules are complex. When listing someone as an independent contractor, different tax rules apply. And by that we mean relatively simpler. You only pay the contractor and they worry about how to file taxes on it, not you.

Does that mean you can list your employees as independent contractors? Absolutely not! Not only is this illegal, but you would be in great trouble by the tax authorities if they misrepresent your tax status.

Is there a solution for this?

Let’s break down the problem. If you have employees on your payroll who work remotely, you need to consider their residency status for tax purposes. There can be several scenarios in which an employee works remotely:

  • An employee who works remotely in the state where your company operates and where they are liable for tax
  • An employee who works remotely in a different status than what you are in, e.g. B. a remote worker outside of the state
  • If your employee lives in a state that follows multi-state tax law
  • If your business operates in a state that complies with the employer’s rules (where the employee is taxable in the state where your business is located, not where they are resident)

It’s no lie to say that determining taxes based on the residence status of your employees is a nerve-wracking exercise.

If you only hire independent contractors or freelancers, you can get away with the tax ramifications. But what about the trust and accountability of work? How can you make sure you get your money’s worth? Most likely you can’t. You can try, but it’s impossible to build and grow a business without a responsible workforce.

Welcome to a rock and a tough place.

Enter the remote employee marketplace

There are many platforms that provide access to top freelancers. Upwork, Fiverr, Freelancer etc. are excellent platforms for this. But not if you are looking for it Build scalable teams.

A remote employee marketplace like Wishup gives you fully managed remote employees. This means that you don’t have to worry about:

  • Scouting
  • Onboarding
  • training
  • Payroll
  • Services
  • Performance reviews

Wishup takes care of everything for you. We have some of best distant talent You can use it for your fast growing business. Since they’re on Wishup’s payroll, you never have to worry about employee taxes. As with other talent markets, you have a choice of who to work for. However, unlike other such marketplaces, you can also rest assured that the job will be done and accountability built into the process.

The remote worker assigned to you did not meet your expectations? Don’t worry, we’ll switch it over and get a suitable replacement for you within a few days.

you Pay a subscription fee to WishupSimilar to how you pay for the various software tools that you may use like a CRM or a project management tool.

Wishup gives you the confidence and accountability of an employee with the tax exemption of an independent contractor. Then what are you waiting for?

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