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Outsourcing is a cost-saving practice used by companies where a company relies on an external source to get a company need met, whether it be in business processes, information technology, manufacturing or material supplies.

Types of outsourcing: There are various types of outsourcing -- from highly specialized knowledge to highly repetitive tasks -- that companies use, such as IT outsourcing, customer service outsourcing, or business process outsourcing, which includes typically internal office functions such as human resources and accounting.

To watch out for: Most individuals outsourced by companies are considered independent contractors; however, the IRS has strict rules about who is considered an independent contractor versus an employee -- the latter of which the employer is responsible for paying social security taxes and employee benefits, so be sure to check the federal government’s “The Employer’s Supplemental Tax Guide” or “Independent Contractor or Employee?” for guidelines.

Helpful outsourcing resources: Outsourcing”; “How to Build a Better Business with Outsourcing”; “The Pros and Cons of Sourcing.”