Content creators thrive when they focus on the work they do best: creating. As your audience grows, however, so do the demands on your time. Editing videos, designing graphics, managing emails, and handling admin tasks can quickly become overwhelming. That’s why many creators turn to virtual assistants (VAs) and contractors. Hiring outside help allows you to reclaim time, scale your operations, and stay focused on growth.
What many creators don’t realize is that bringing in help also comes with important tax responsibilities. Whether you hire a virtual assistant for a few hours a week or rely on multiple freelancers for different projects, the IRS has clear rules on how these workers should be classified, how you should report their payments, and what deductions you may be able to claim. Missteps can lead to costly penalties, while proper planning can reduce your tax burden and keep your business compliant.
This guide explains how to classify workers correctly, structure contracts, understand your tax obligations, and maximize deductions when hiring VAs and contractors.
Payments to virtual assistants and contractors are considered business expenses, and the IRS expects them to be reported accurately. According to IRS Publication 535: Business Expenses, ordinary and necessary costs of running your business are deductible, and that includes the fees you pay to freelancers.
If you pay a U.S.-based contractor $600 or more in a year, you must issue them a Form 1099-NEC and file it with the IRS. Before making payments, you should request a Form W-9 from each contractor to have their taxpayer information on file.
The IRS treats these payments seriously. Even if you think of your virtual assistant as a casual helper, the IRS considers them part of your business operations, and that means record-keeping and reporting rules apply.
The IRS applies Common Law Rules to determine if a worker is an employee or an independent contractor.
The first factor is behavioral control. If you direct when, where, and how the worker completes tasks, the IRS may see them as an employee. The second is financial control. Employees typically receive the necessary tools and resources from their employer, while contractors invest in their own equipment and cover their own expenses. The third is the overall relationship between the parties. Employees generally have ongoing roles with benefits or long-term commitments, whereas contractors are typically project-based and work without such benefits.
If you misclassify an employee as a contractor, the IRS can require you to pay back payroll taxes, plus penalties and interest.
A written contract is essential. It not only sets expectations but also helps support the independent contractor classification. The U.S. Small Business Administration recommends using contracts that clearly define the terms of the relationship.
When drafting a contract, describe the specific services the contractor will provide and the terms of payment, whether hourly, per project, or on retainer. Include confidentiality agreements if the work will involve handling sensitive information, and clearly state who owns the final product of the work. It is also helpful to state explicitly that the individual is being hired as an independent contractor, not as an employee. While this clause does not override IRS rules, it demonstrates your intent and creates clarity for both sides.
The IRS requires specific forms for reporting contractor payments. Form W-9 should be collected before you make any payments. It provides the contractor’s legal name, business name (if applicable), and taxpayer identification number. If you pay a contractor $600 or more in a year, you must also issue a Form 1099-NEC by January 31 of the following year and file it with the IRS.
If you hire contractors outside the United States, you generally do not issue a 1099-NEC, but you may need to collect a Form W-8BEN to document their foreign status. Payments to non-U.S. contractors may also be subject to withholding depending on tax treaties.
Failing to file the right forms can result in penalties, even if you reported your expenses accurately on your tax return.
Payments to contractors and virtual assistants are tax-deductible as ordinary and necessary business expenses, according to IRS Publication 535: Business Expenses. These costs are reported on Schedule C (Form 1040) along with other expenses related to your creative business.
Beyond direct payments, you may also be able to deduct related costs such as fees paid to platforms like Upwork or Fiverr, subscriptions for project management tools, advertising costs for posting job listings, or payment processing fees from services like PayPal and Venmo.
For example, if you paid a VA $8,000 during the year, plus $500 in platform fees and $200 in software costs, you could deduct the full $8,700 as ordinary and necessary business expenses.
The IRS recordkeeping guidelines require you to maintain documents supporting both income and deductions. For contractor payments, this means keeping W-9 forms, invoices, bank statements, PayPal records, and signed contracts.
The IRS generally advises keeping records for at least three years; however, certain documents should be retained for longer periods. If a contract relates to an asset or has long-term implications, you should keep it until the asset is sold or the issue is fully resolved. Many small business owners choose to keep contractor-related records for six years as a safeguard against audits.
Creators do not pay payroll taxes for contractors or virtual assistants. Independent contractors are responsible for paying their own self-employment taxes, including Social Security and Medicare, through quarterly estimated payments. Guidance on these payments is explained in IRS Publication 505: Tax Withholding and Estimated Tax.
That said, you cannot classify someone as a contractor just to avoid payroll taxes. If the IRS determines that the worker functions as an employee under its rules, you could be liable for back payroll taxes and penalties.
Many creators make the mistake of misclassifying workers, treating them like employees while paying them as freelancers. This includes setting fixed schedules, controlling how they complete work, and providing all the necessary tools. Another common problem is missing the January 31 deadline for filing Form 1099-NEC, which can lead to IRS penalties.
Poor documentation also creates issues. Failing to collect W-9s or neglecting to save invoices and payment records makes tax season stressful and leaves you exposed in the event of an audit. Finally, overlooking related deductible costs such as job posting expenses, platform fees, or management software means you miss out on valuable tax savings.
Hiring virtual assistants and contractors can transform your business. By delegating tasks, you regain valuable time, improve your content, and expand your capacity for growth. But the benefits only last if you handle the tax side correctly.
Payments to contractors must be reported accurately, classification rules must be adhered to, and proper record-keeping is essential. The good news is that these costs are deductible, which reduces your taxable income while allowing you to invest in the help you need.
Think of hiring support as more than an expense; it is an investment in your business. With proper contracts, compliance, and financial planning, you can grow with confidence while avoiding costly mistakes.
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