The Small Business Tax Help Blog

Archive for October, 2009

The days when a small business could ignore the risks of having misclassified workers are over. Unfortunately, some employers improperly classify their employees as independent contractors to avoid the pain associated with having employees, namely:

Additionally, employers don’t have to cover independent contractors under workers’ compensation insurance, and are not liable for payments under unemployment insurance, disability insurance, or social security.

It’s true, the expenses associated with employees are high. However, the cost of misclassifying workers is even higher. If your contractors are determined to really be employees you will not only be required to pay the taxes and fees you should’ve, you may also be required to pay the employee’s taxes as well. Not to mention the stiff penalties and interest that can be imposed by both federal and state agencies for violating the various laws.

This is no small matter and is on the radar of every government agency out there, all of whom are anxious to find additional revenue sources these days. The IRS estimates that one in seven U.S. employers is guilty of misclassifying some of its employees, resulting in a loss of more than $4.1 billion a year in tax revenues. These days the question is no longer “if” you’ll get audited for employee misclassification it’s “when”.

For businesses facing an audit, the odds favor the IRS. A recent report found that 92 percent of the companies audited for “misclassification” were hit with significant penalties and assessed for back taxes. Between 1988 and 1995, the IRS audited more than 13,000 businesses, reclassified 500,000 of their independent contractors as employees, and levied $830 million in back taxes and penalties.

Making matters worse, sometimes the various agencies disagree. For instance, here in California there are several state agencies involved with the determination of independent contractor status: (1) the Employment Development Department (EDD), which is concerned with employment-related taxes, (2) the Division of Labor Standards Enforcement (DLSE), which is concerned with whether the wage, hour and workers’ compensation insurance laws apply; (3) the Franchise Tax Board (FTB), which is concerned with state income taxes; (4) the Division of Workers’ Compensation (DWC), which is concerend with worker’s compensation; and (5) sometimes even the Contractors State Licensing Board (CSLB), that also have regulations or requirements concerning independent contractors and it’s not uncommon for one to rule that a worker is an employee while another rules that the same worker is an independent contractor.

Because the potential liabilities and penalties are so significant if an individual is treated as an independent contractor and later found to be an employee, each individual working relationship needs to be thoroughly analyzed to make sure every single worker is properly classified. Now is not the time to group classes of employees together. Just because one of your workers qualifies as an independent contractor, don’t assume that all the others doing similar work will.

It all boils down to control – does your business have control or the right to control the worker both as to the work done and the manner and means in which it is performed? The IRS breaks control down into three categories: behavioral control, financial control, and relationship of the parties. It is very important to consider all the facts for every single one of your worker relationships – no single fact provides the answer.

Behavioral Control

These facts show whether there is a right to direct or control how the worker does the work.

Financial Control

These facts show whether there is a right to direct or control the business part of the work. Here are a few questions to ask yourself:

Type of Relationship

These facts show how the business and the worker perceive their relationship.

You’d think that a written contract detailing that you and your worker agree that you are not creating an employer-employee relationship is all that’s needed, but unfortunately this isn’t the case. It may certainly help, especially is you subsequently issue a 1099 form instead of a W-2 form, but even this doesn’t guarantee protection.

QuickBooks handles W-2’s differently based on which payroll subscription you’ve chosen. There are three options available:

If you decide to classify some or all of your workers as independent contractors, there isn’t as much paperwork but there are some reporting requirements:

If setup properly, QuickBooks can help you track all the information needed for 1099’s. Here’s how:

In the end, how to classify your workers is a business decision that only you can make. You may save money upfront by classifying them as independent contractors, but you could end up paying much more in the long run if they are reclassified. Protect yourself as much as possible with a paper trail – contracts, agreements, written answers to the questions listed above. You might even consider requiring your independent contractors to prove you with documentation that they are actually operating a small business themselves, such as a business license, Doing Business As (DBA) or Tax ID number from the IRS.

If you need additional assistance, please call our QuickBooks technical support line at 888-351-5285. We are here to help you get the most out of QuickBooks!

PROVISO Community Calendar

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Self Employment Tax Tips : Alternate Minimum for Self Employment Tax

Taxes are one of the major contributors to national treasury of any country. These in turn are utilized to carry out all the developmental activities for the benefit of the general masses. Individual taxes and corporate taxes are forms of direct taxes levied by the government. Every country has its financial head in the form of Finance Minister who frames laws concerning the nation’s budget. Each year, these laws are revised to meet the needs of current financial trends. It is mandatory for both individuals and business houses to file their annual tax returns. While it may be quite simple in case of individual returns, it can be quite complex when it comes to accounting for large scale business enterprises. Besides these innumerable financial entries, there is an exhaustive list of legal formalities which have to be complied with. With so many aspects to be taken into account for the calculation of tax, chances of errors are quite high. This is why most business units hire or employ the services of tax return specialists to ensure that errors are avoided. Individuals and small business units, household ventures who do not wish to spend large amount of money in hiring professional tax consultants can refer to tax planning books the fill up their tax returns on the basis of information provided in them. Since tax rates are subject to revision every subsequent year, tax planning may vary from one financial period to another.

Tax planning books are useful business books which specially cater to the needs of calculation of corporate taxes. Small Business Tax Planning is all the more crucial for small businessman, as they cannot afford to take huge risks and push the firm into financial crisis. Thus, they too can refer to tax planning books besides small business books to have a better insight into tax exemptions and rebates to save some amount of their funds. Business books related to tax planning are in huge demand these days as every organization employs information contained in them to avoid getting into legal muck. Be it registration of trademark or patents or filing of taxes; innumerable firms have fallen prey to legal proceedings.

Tax planning are specifically published business books to comply with tax regulatory authorities governing that country. Any discrepancy in this regard may subject the defaulting company to unnecessary legal proceedings. Small Business Tax Planning is essential if the small business owners intend to make their business a profitable venture. Tax planning books give entrepreneurs an opportunity to compute their firms’ annual tax returns using easy step wise guidelines. These business books prove to be beneficial for all kinds of business entities irrespective of the size and scale of operation. These books are not only informative but also serve as wise mentors guiding business owners on crucial tax related issues.

LA Business Tax committee tackles job creation, tax reform

Top city officials today convened the first meeting of the Business Tax Advisory Committee, created to recommend Business Tax reforms that will foster job creation.

Congressman Vern Buchanan Calls For Tax Code Simplification For Small Business.

MOLY-MINES – Nächster Rebound Kracher

1. MOLY-MINES – Nächster Rebound Kracher 983 Postings ausgeblendet. 985. schafft Molly heute 0,60 ? ———– Kaufempfehlungen kommen immer erst bei Verdreifachung und Verkaufsempfehlungen immer dann wenn der Kurs am Boden liegt.

COP 15 – WAR ON CAPITALISM

Question: My x used my EIN # to do sub work with. I need to know how not to be responsibility for those taxes. The co.

sent me copies of the checks he recieved. I was told I had to claim that because I did not close my #. It’s not right because I did not recieve any of that money.

Answer: Apparently, your ex illegally used your EIN #.

The fact that you did not close your EIN # does not make you liable for actions he took without your permission or knowledge.

Have your CPA contact the IRS to get this corrected.

Good luck.

If Peter Orszag Is So Smart, What Will He Do Now?

Washington

iPhone 3.1 beta 3 can copy / paste video files

Child Support payments in Canada are appointed by the judge and starting from 1997 regulated by federal Child Support Guidelines. The initial appointment of the Child Support payments id divided into four steps. It starts with the calculation of the gross incomes of the parties. The second step is entering the non-custodial parent’s gross income is entered into the Table, under the appropriate number of children. It shows the tax free amount of money the non-custodial parent must pay the custodial parent each month for child support. If the parenting time is shared equal then the gross incomes of each parent are entered into the Table. The lower result is then subtracted from the higher number and then the difference is payable by the higher income earner to the lower income earner. Still there are some excepti`ons for some cases. Third step is determining the expenses for things like child care, health care, educational expenses, post-secondary educational expenses or extracurricular expenses, the expenses are shared in proportion to the parties’ gross incomes.

While in Canada everything is pretty clear with appointing the initial Child-Support itself a big question is what happens to the Child-Support payments when the payer changes his employment or salary. The Child Support Guidelines state that the court may impute such amount of income to a spouse as it considers appropriate in the circumstances. The circumstances include situations when the spouse is intentionally under-employed or unemployed, other than where the under-employment or unemployment is required by the needs of a child of the marriage or any child under the age of majority or by the reasonable educational or health needs of the spouse. The most important factor for all the decisions of the courts is how and why did the employment or salary changed. The court actually works under the line that after a divorce the child must benefit from the finances of the both spouses. If one of the spouses lost his job intentionally (voluntary act) for example choose to earn less than he or she is capable of earning or he or she choose not to work when capable of earning income, then the court will most probably be on the side of the other spouse. Still if the loss of the job or income is lost due to no fault of the spouse (like reducing the hours of work or being fired for some other reason), the section does not apply to such situations. In practice the results vary from case to case and from province to province. While it is easy to conduct an investigation and find out the reason of loosing income, there are also some ethical questions involved. The biggest one is that Child Support Payments usually limit the personal interests of the spouses. For example if you worked as an office clerk and decided to pursue a music career you will most probably be limited by the payments and the court will not support your decision.

Waste firm takes STEPS for hiring in tough times

NCS President and CEO Lee Bush wants to hire more workers, but like so many other business leaders he can’t afford the additional expense.

Hidma tal Gvern – Tnaqqis fl Income Tax