With more and more jobs transitioning to remote and staying remote after the 2020 pandemic lockdown, companies continue to evaluate which jobs can remain at home. There are several benefits to hiring remote workers–you don’t need to upgrade your commercial space to accommodate a growing employee force, which means you can save on rent and even workspace equipment.
Additionally, productivity increases when employees can work remotely. Forbes reports that there was a 13% observed increase in productivity when employees worked from home rather than in person.
But with this growing, untraditional move in the workforce, many employers are left scratching their heads on how to handle taxes in these cases. Whether you’ve hired an IT company in the Houston area or your in-house IT department went fully remote with members moving out of state, you want to make sure your books are accurate.
In short, all work gets taxed. Who pays what and with which forms depends on the location of your remote IT support personnel, your company’s location, and whether the IT professional works as an employee for you or is outsourced (via contract or freelance).
What Tax Forms Do I Need for Remote Employees?
Something both employees and employers need to consider is whether or not the employee in question is permanently or temporarily remote.
Permanent remote workers have a worksite that is outside of the geographic location of the business, and this can apply to employees living blocks away from the business location or across the world. There is no expectation for permanent remote workers to be present at the business’s geographic location.
A temporary remote worker has retained their worksite at their employer’s geographic location, even if they have been performing their job duties outside of said location. There is still an expectation this employee can return to the worksite.
These distinctions matter most for in-house, remote workers but can apply to outsourced workers as well. The tax forms for in-house and outsourced remote workers vary.
Remote, But 'In-House'
'In-house' doesn’t necessarily mean you have an employee working at your company’s physical location. When work is done 'in-house,' it simply means the work and projects are done by employees of the company, rather than by workers outside the company (such as freelancers or contractors).
If your IT support works as a member of your company as a permanent remote worker, they will file their personal income taxes in their state of residence if they are a W2 employee. If they reside and work in a state that differs from the state where your company hosts its primary worksite, the employee would file for income taxes in both states (when applicable to the state).
You will know someone is a W2 employee if you answer 'yes' to any of the following:
Will the individual work only for you?
Will you provide the tools and training for your workers?
Do you control the hours the person works?
In this case, you need to withhold taxes, file forms W2 and W3, and pay payroll taxes.
Remote and Outsourced
From a business owner's standpoint, taxes are a major reason why companies don’t hire in-house IT support anymore. A major reason for this is that you do not have to withhold or pay any taxes on payments to independent contractors.
An outsourced employee or, in this case, IT support personnel, is someone who does not fit into the questions we mentioned in the 'Remote, But In-House' section. Hiring an IT Support company, like Xvand, would fit into this category. They include 1099 workers working remotely, freelancers, and independent contractors. Possible tax forms you would need include the 1099-NEC and the W9 forms.
Hire IT Support at Xvand
Do you need monthly IT support, but don’t know where to start? At Xvand, you can have access to a 24/7 expert help desk, software development, cybersecurity, private clouds, and more.
Hiring an in-house IT department is a tall order. Taxes aside, the hiring process, training, and navigating remote workspaces can drain your time and budget. Xvand’s business model reflects 'pay for what you need,' rather than risk surprise charges or overtime. We value transparency and prioritize giving your company the IT support it needs.
Ready to take your team to the next level? Contact us for your free estimate today!