Are you hiring a freelance writer? Or a temporary employee?

When hiring a freelance writer it's important to make sure the person is in fact a freelancer - an independent contractor - and not a "temporary employee." If tax authorities classify a writer you hire as a temporary employee, your business may be required to withhold income tax, pay the employer portion of Social Security and Medicare taxes, and provide employee benefits. By contrast, independent contractors pay their own way, from taxes to insurance.

That's a huge savings to you in both cost and paperwork.

Unfortunately, the Internet is crowded with self-proclaimed freelance writers. Some are students. Others are moonlighting while working day jobs. Still others are unemployed and hoping that a freelance gig will turn into a full-time job. Hiring such a writer could put you at risk, should tax authorities classify that person as a temporary part-time employee.

The dividing line between freelancer and temporary employee can be somewhat fuzzy, especially with large projects and ongoing relationships. There are general rules, but they can't cover every possible business relationship or situation; even IRS publications state that "no single fact provides the answer."

That said, I've worked with numerous companies large enough to have resources dedicated to the procurement of professional services and the vetting of independent contractors. Based on those experiences, here are some indications that the writer you're hiring may be considered to be a temporary employee.

• The writer works on-site
• The writer has no other freelance work
• You set the writer's work hours
• You tell the writer how to perform the work
• You require training
• You provide the equipment the writer uses to do the work
• You provide supervision
• You provide employee benefits
• You file a Form W-2

Here are some indications - some stronger than others - that point toward individuals being genuine self-employed freelance writers.

• They work off-site
• They pursue other projects and clients, even during your project
• They set their own hours
• They use their own methodology or processes in performing the work
• They already possess the skills you require
• They work on their own equipment
• They are not supervised
• They incur expenses such as self-promotion, insurance, and supplies that are not directly reimbursed
• They can realize a profit or a loss
• You file a Form 1099-MISC

In a nutshell: A freelance writer runs his or her own business, separate from yours - and the more separate it is, the better. Things like a business license, opportunity for a loss, active marketing directly to other companies, full-time self-employment, and proof of other clients are often powerful indicators of independent contractor status. If you don't know whether or not those points are met, that may be a huge warning sign.

Hiring a freelance writer makes it easy to get the things you need written. But, it pays to make sure the person you hire is, in the eyes of the law, a professional freelance writer.

John Kuraoka is a freelance advertising copywriter, and not a taxation or human resources expert. He works with companies ranging in size from small businesses to Fortune 100 companies. And, as a full-time, professional freelance writer, it's his job to have time for your next project. Call him at (619) 465-6100.