When employees work remotely, there are a number of ways to support them. The first order of business is to iron out how you’ll communicate about finances. How will you get in touch? How often will you check in? What tools will you use?
No matter what sort of business you run, you’ll need to communicate expectations, despite the distance. You’ll also need to use remote working tools to your advantage. Thankfully, the tools are more robust than ever before.
Whether you employ contractors or full-time employees, you’ll need to manage your business finances around employment, as well as help employees manage finances and expenses.
Differentiate between full-time employees and contractors
As a business owner, you may employ full-time employees and contractors. These two groups are classified differently when it comes to taxes. Properly classifying your employees is required by the IRS.
- Employees get paid a regular wage by their employer. Businesses need to withhold, deposit, report, and pay employment taxes, withhold and pay Social security and Medicare Taxes, and pay unemployment tax on wages paid. The IRS also requires that you file special paperwork for employees.
- Contractors, on the other hand, get paid by the hour or for a project. From a financial perspective, they don’t require you to do much besides issue a check or make a direct deposit. They arrange and pay their own taxes. You aren’t required to give them benefits, either.
These two groups may have different expectations when it comes to working remotely. You may provide resources to your employees that are not necessary for contractors. Because contractors are independent, they are granted more freedom in how their work is completed.
Communicate expectations, despite the distance
It’s easy to see what employees are working on when you’re together in an office. If you want to have a meeting to go over plans, projects, and expectations, you can schedule one.
When working remotely– especially if it’s under unusual circumstances– you’ll need to communicate your expectations. How many hours should an employee be available to connect? What should their priorities be? Communicate these expectations to employees so they’re kept in the loop.
Remember that unusual circumstances may prevent your employees from being as productive or available as they used to be. Be understanding of other obligations. One of the advantages to working from home is being able to greet the mail carrier or tend to a child, so be conscious of what your remote employees are juggling.
Relieve employees’ financial stress
In a time of high anxiety, your team may be stressed about finances. Although circumstances may make it impossible for you to make long term promises, remind employees when they can expect their next paycheck.
Share resources that may help them with their own financial planning. It’s also a good idea to share information about the business– be transparent so employees can jump in and help. Whatever you can do to reassure your team will have an impact.
Tell remote employees what they can expense
You and your team may qualify for a number of expenses while working remotely. You’ll be able to claim these expenses for tax purposes, which may go a long way in relieving financial burden.
These types of tax deductions are normally reserved for employees and businesses working from home full-time. If your employees are just temporarily working from home, this probably doesn’t apply to them! It’s worth keeping track of all these deductions throughout the year—then at next year’s tax time, ask your CPA about the proper way to claim these deductions.
Here are four types of expenses that are relevant when working from home:
1. Home office expenses
Home office expenses are divided into direct and indirect expenses. Both qualify as expenses for tax reasons:
- Direct expenses are those that are directly related to the part of your house that’s used for your office. These expenses include things like painting or replacing the floor and are 100% deductible.
- Indirect expenses are expenses for the entire home– things like utilities and insurance– that are deducted based on how much of the home is used for business. For example, if you use 15% of your home’s square footage as an office, and your total electricity expense for the year is $2,000, you can deduct $300—or 15% of that utility bill—on your tax return.
2. Repairs and maintenance
Repairs and maintenance expenses include repairs and maintenance made to machines and other property. For example, you can deduct costs for re-painting your office or fixing a broken printer.
However, these expenses do not include the value of your own labor, substantial improvements to the property, car maintenance, amounts to restore or replace property (these are capitalized instead).
Anyone working remotely for the first time may need to purchase supplies to be productive. You can expense “incidental” office supplies such as pens, note pads, and other supplies.
Office utilities like power, water and internet are tax deductible. However, don’t include home office utilities here—they should be recorded under the “Home Office” category instead.
If you use your cell phone for both personal and business use, you can write off the portion of your phone bill used for business. A simple way to do this is to track your phone usage for a month, then multiply that value by 12.