Employee or a Contractor?

	Issue #111   August 27, 2013
Newsletter   I think this is one of the top 5 questions I get from clients: “Is my worker an employee or independent contractor?”.  As a good tax professional, the answer is, “It depends!”  Read the article below to learn more about employees vs. independent contractors so you can be sure to stay in compliance with the IRS and EDD!  If you are still stuck or need confirmation, call us for a consultation for your specific situation.  To Your Success, Renee and Team
Employee vs. Independent Contractor  By: Renee Daggett It is critical that a business owner classifies a worker correctly.  One of the top questions I receive is how to determine if someone is an employee (W-2 worker) or an independent contractor (1099-MISC worker).  Before you can determine how to pay a worker, you need to determine the relationship that exists.  Definition of Workers:  An employee is a person who works in the service of another person or organization.  They are typically paid either a salary or hourly and will fill out a timecard.  The employer will control what work the employee performs.  The employee qualifies for unemployment compensation where an independent contractor would not.  An independent contractor is a person/business that offers services to the general public.  They may have a specific license; such as a construction worker or accountant.  They should always have a business license in the city/town they reside.  Independent contractors will be hired by signing a contract and will provide invoices in order to be paid. Common Law Rules:  There are 3 rules that the IRS will review to determine the status of a worker: 1. Behavioral – Does the company control or have the right to control what the worker does and how the work is done? 2. Financial – Are the business aspects of the worker’s job controlled by the payer? 3. Relationship – Are there written contracts or employee type benefits? Official Determination:  If you are unsure of a specific situation, the IRS has a form, the SS-8, that when filled out and turned in, the IRS will officially determine the status of the worker.   We recommend that you review this document so you can see what the IRS will be asking in order to decide if the worker is an employee or independent contractor.   Click here for a copy. Misclassification of Worker:  If you classify a worker as an independent contractor and are wrong, you may be held liable for employment taxes for that worker.  This means fines, penalties and back taxes!!  Be careful, because the State of CA, Employment Development Department, is very aggressive and will charge penalties and interest on the payroll taxes you should have paid on the worker. Construction workers are the most misclassified.  If a “contractor or sub-contractor” does not have a license, they are an employee.  Volunteer Classification:  The IRS allows eligible employers the opportunity to participate in a low-cost option for correcting the status of misclassified workers from independent contractors to employees.  The program requires a payment of just over one percent of the wages paid to the reclassified worker for the past year with no interest, penalties or risk of future audit for any prior years.  While enticing, it does not come without risks.  Determining the Status:  Whether a worker is an employee or an independent contractor depends on some factors.  Click here to learn more. Download PDF copy. Did You Know? •If you have not filed your tax return for more than 3 years and qualify for a tax refund, you will not get the money because you filed too late!  With Admin Books, we help you to file on time and verify that you get every deduction you qualify for! •A meal is not deducitble when you eat by yourself!  This includes invisible friends. (You can deduct meals when you travel out of town when you eat by yourself.) •Go to the website www.irs.gov and type in “W-4 calculator” in the search box. This is a valuable tool. After answering a few questions, the site indicates what your expected refund will be for 2013. Also, remember to always consult your tax preparer for individual advice. Our Featured Client: Home-Teck Shading Solutions We have some fabulous clients that have amazing businesses.  As an added value of working with Admin Books, clients are highlighted in our newsletters.  See their answers to our interview questions below. 1. What is your industry?  Retractable awnings and shade structures. 2. What is unique about what your business offers?  My company is your one-stop, custom design shopping experience for retractable awnings and shade sail awnings. With the help of my easy measuring directions, you design your custom awning or shade using my imported European high-quality hardware and select from a large selection of famous quality Sunbrella fabrics.  I then hand-assemble your awning at my office and deliver it to your home, where I can also install it, if desired. My prices are kept low because there are no dealers or third parties involved, just me, the owner and builder. Call me today for a free consultation or for more information about my products. 3. Who is your ideal client?  Residential homeowners and commerical buildings. 4. What is the best business advice you can pass on?  Respond quick, be friendly and do an excellent job. San Francisco Bay Area, CA 408-607-9126 | www.Home-Teck.com "The trouble with talking too fast is you may say something you haven't thought of yet." ~Ann Landers, Advice Columnist    Our Business Corner Do you have questions on home office rules, auto deductions, charitable donations, etc.?  Here is some information on those HOT Take advantage of this helpful guide full of important BUSINESS TIPS.  Check out the 2013 NEWSLETTER ARCHIVE to see any of our past newsletters. Looking forward to connecting with you, 408.782.9640 Enter Website Enter Facebook Fan Page  Subscribe to Newsletter
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