If you're a reader of this blog who is selling services, particularly consulting or other kind of contract work, then --- alas --- one of the objections you need to be prepared to respond to is this one: "The IRS (and state tax people) look very closely over our shoulder when we try to work with contractors. The IRS prefers that we just put people on the regular payroll, so it is easier for the tax people to be sure we've paid all the taxes and such. So, sorry, we just can't risk buying your services."
So, given that objection, how do you respond? My suggestion: read this article in the New York Times Small Business Guide section. It's by Katherine Reynolds Lewis, and it links to some other comments and related articles.
Link to the article: "Hiring contractors without getting into trouble"
The article is written to advise the businesses that may take on contractors; that tells you the concerns and hot-button issues, which you can turn around to your own situation.
One comment: I can't find the reference right now, so am relying on memory, but seems to me there was an article not long ago that the IRS was in the process of hiring 6,000 new agents, mainly to police this issue, of firms seeking to take on contract employees as the economy was so weak they couldn't risk taking on payroll employees.
The good news? That's 6,000 new jobs!Great news in the headlines!
The bad news? Let's not even think about all the contractors, consultants, free agents and free lancers who are not working because of the shadow of a potential IRS audit hanging over the process.
More bad news? Let's not think about the work and productivity that could flow if businesses didn't need to "invest" so much in fighting and avoiding audits.)