There are important distinctions between an employee (telecommuter) and an independent contractor (virtual assistant) and it is imperative that one learns the differences. If you do not, the IRS will be in touch. Here are some questions to ask that will help you assess the situation.
Do you control the output of said person’s services? In other words, are they only able to perform their job with specific instructions on what you want and how you want it? (IRS’ words: “You are not an independent contractor if you perform services that can be controlled by an employer (what will be done and how it will be done). This applies even if you are given freedom of action. What matters is that the employer has the legal right to control the details of how the services are performed.”)
Do you reimburse said person’s expenses? In other words, do you provide office supplies and tools or reimburse them for the costs they incur? (IRS’ words: “Are the business aspects of the worker’s job controlled by the payer? (these include things like how worker is paid, whether expenses are reimbursed, who provides tools/supplies, etc.”)
Do you provide any benefits such as vacation pay, sick pay, or pension or any other type of benefit?
Do you hire said person to work indefinitely or do you have a range of time? (IRS’ words: If you hire a worker with the expectation that the relationship will continue indefinitely, rather than for a specific project or period, this is generally considered evidence that the intent was to create an employer-employee relationship.)
Is said person’s work a key activity to your business or is it something that is not necessary for it to function? (IRS’ words: If a worker provides services that are a key aspect of the business, it is more likely that the business will have the right to direct and control his or her activities. For example, if a law firm hires an attorney, it is likely that it will present the attorney’s work as its own and would have the right to control or direct that work. This would indicate an employer-employee relationship.)
If you hire a virtual assistant or independent contractor then you cannot tell them what hours they must work or how they must do their job to get it done. That may be a drawback for some. The plus side is you do NOT pay vacation, sick, or health insurance. You also do not pay federal income tax, social security and Medicare taxes and Federal Unemployment (FUTA) Tax.
Another perk! Is the fees you pay to contractors are generally tax deductible, but don’t forget you should have also sent contractors form 1099-MISC if you paid them over $600.