This may be a silly question, but I'm new to this, so please bear with me. I recently formed an LLC a few months back. I am considering outsourcing some tasks ( writing , link building, whatever ). My question is this - how does this play out from a business / taxation standpoint. Meaning, am I required to send the folks that do work for me a W9 or anything like that? And what sort of proof do I need to have on hand, in case the IRS does an audit? I would imagine that any amount I pay for these services would of course be deductable as an expense on my tax return, correct? Thanks in advance.
In the US, there are companies (LLC's included) that will send out 1099's once they outsource over $600 of work, but I don't think it is required...you may want to consult your accountant. What you pay is deductable as a business expense...as long as it is a business expense. Keep records and invoices you pay. Jim
Yup outsourcing expenses are legitimate business expenses. Make sure the person you outsource to does work for others. If a subcontractor gets classified as an employee by the IRS it gets real ugly real fast. And as Jim says accurate records reflecting the relationship are very important.
Ugh that's a good point that I hadn't considered... i certainly wouldn't want a subcontractor to look like an employee. I'd imagine things get really hairy then.. On another note.. would paying via PayPal be acceptable, or should I stick with company check?
I've never heard the "does work for others rule." It may exist tho, but seems borderline at best. But, DO make sure your "contractor" uses their own equipment, supplies, etc. The only condition you specify should be "complete this work, by this time/date and I'll pay you this amount of money."
1) Ask for an invoice for ALL services you outsource 2) Claim these as business expenses on your taxes. If you have invoices/paid receipts to back them up.