Can I hire employees as independent contractors to save money on taxes in Delaware? What are the requirements?

Hiring employees as independent contractors in Delaware

In Delaware, hiring employees as independent contractors to save money on taxes is not recommended. Delaware law requires that any person desiring to engage in business in the state as a contractor must obtain a license upon making an application to the Division of Revenue and paying a fee of $75 ^[1.1]. Additionally, every employer required to deduct and withhold tax under Delaware law is made liable for such tax ^[5.2].

Requirements for obtaining a contractor’s license

To obtain a contractor’s license in Delaware, the person must comply with all the provisions of § 375 of the Delaware Code applicable to such person, file a certificate of notice issued by the Delaware Department of Labor certifying that such person has notified the Department of Labor that such person has entered into or will be entering into contracts to perform labor on or to perform labor on and furnish material for a construction project located in Delaware, and file a certificate of insurance showing that such person has insured liability in the amount and manner, and when due, and as required, under the workers’ compensation laws of this State ^[1.1].

Other tax-saving options

If you are looking to save money on taxes in Delaware, there are other options available. For example, Delaware offers a tax credit for wages paid to qualified employees ^[4.1]. Additionally, there are exemptions from occupational license taxes available ^[3.1]. You may also want to consult with a tax professional to explore other tax-saving strategies.

Conclusion

Hiring employees as independent contractors to save money on taxes in Delaware is not recommended. Delaware law requires that any person desiring to engage in business in the state as a contractor must obtain a license upon making an application to the Division of Revenue and paying a fee of $75. Additionally, every employer required to deduct and withhold tax under Delaware law is made liable for such tax. To obtain a contractor’s license in Delaware, the person must comply with all the provisions of § 375 of the Delaware Code applicable to such person, file a certificate of notice issued by the Delaware Department of Labor certifying that such person has notified the Department of Labor that such person has entered into or will be entering into contracts to perform labor on or to perform labor on and furnish material for a construction project located in Delaware, and file a certificate of insurance showing that such person has insured liability in the amount and manner, and when due, and as required, under the workers’ compensation laws of this State.

Source(s):

• [1.1] License requirement; resident and nonresident; additional fee on gross receipts paid; statements required.
• [3.1] Exemption from occupational license taxes.
• [4.1] . Credit for wages paid to qualified employee.
• [5.2] Employer’s liability for withheld taxes.

Jurisdiction

Delaware

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