Today we welcomed a new addition to the Gusto family — independent contractors. We’ve extended our modern approach to payroll from employees to contractors. You can now pay your entire workforce from the same delightful, intuitive payroll system.
Ryan was the first customer to start paying his contractors on the app, so we asked him what he thought about it:
“I’ve been paying my contractors by check, through my bank website, and PayPal. Every year I spend hours trying to gather all of my payment records to manually create a 1099. I love the time savings and convenience Gusto provides, and my contractors love getting paid through direct deposit,” said Ryan Dawkins, President of Project Sport, a San Francisco-based sports marketing and event management company. “Everything is handled in one place and automatically recorded for me at the end of the year. Payroll couldn’t get any easier!”
Every business is required to file Form 1099 with the IRS at the end of the year for any contractor who received more than $600 in wages. The contractor is also entitled to receive a copy for income tax reporting purposes. But, while many of you are working with independent contractors (there’s more than 43 million in the US alone – nearly 1/3 of the workforce according to the GAO), many of you are overwhelmed with the complexities of tracking and reporting their wages. Like Ryan experienced, it’s a real pain to go searching for all those receipts or manually track payments in a spreadsheet for every contractor.
Whether it’s forgetting to file Form 1099 altogether, incorrectly reporting wages, or making filing errors with the government, sizable penalties can result. One Chicago-area housing contractor that failed to keep proper records and incorrectly classified 18 workers as contractors faced civil penalties of $327,000, plus $1,500 for poor record-keeping. Ouch!
We believe that payroll should encompass everyone in the workforce – whether it’s a traditional employee or part-time contractor. We’re excited to bring our focus on ease of use and delight to this important business process. With Gusto, independent contractors can be paid through direct deposit and payments will be reported at the end of the year on IRS Form 1099. Once a contractor is added, employers can also record historical payments made outside of the software.