When determining whether your workers are employees or independent contractors, there are several factors you must consider.  The traditional test to determine a worker’s status involves the concept of control.  The IRS developed 20 factors to resolve a worker’s status as an independent contractor under the common law.  The burden of proof is also on the taxpayer.  It is understood that at least 11 of these factors should present evidence of an independent contractor’s status under the common law tests.

For the following questions, answering “yes” means the worker is an employee.

1. Instruction. Does the principal provide instruction to the worker about when, where, and how he or she is to perform the work?
2. Training. Does the principal provide training to the worker?
3. Business Operations. Are the services provided by the worker integrated into the principal’s business operations?
4. Exclusivity. Must the services be rendered personally by the worker?
5. Control of Assistants. Does the principal hire, supervise and pay the worker’s assistants?
6. Continuity. Is there a continuing relationship between the principal and the worker?
7. Schedule. Does the principal set the work hours and schedule?
8. Availability to Others. Does the worker devote substantially full time to the business of the principal?
9. Location. Is the work performed on the principal’s premises?
10. Directions. Is the worker required to perform the services in an order or sequence set by the principal?
11. Reporting. Is the worker required to submit oral or written reports to the principal?
12. Pay Frequency. Is the worker paid by the hour, week, or month?
13. Discharge at will. Does the principal have the right to discharge the worker at will?
14. Termination. Can the worker terminate his or her relationship with the principal any time he or she wishes without incurring liability to the principal?
15. Reimbursement of Expenses. Does the principal pay the business or traveling expenses of the worker?
For the following questions, answering “yes” means the worker is an independent contractor.

1. Tools. Does the worker furnish his/her own significant tools, materials and equipment?
2. Investment. Does the worker have a significant investment in facilities?
3. Profit or Loss. Can the worker realize a profit or loss as a result of his or her services?
4. Other Clients. Does the worker provide services for more than one firm at a time?
5. Availability. Does the worker make his or her services available to the general public?

Keep in mind that if you are found misclassifying an employee, you could face substantial penalties.  This article is intended to give the reader an overview.  It should not be taken as legal or accounting advice.  Seek our personalized, professional advice to guide you through the intricacies of tax matters.  Call us today for a business consultation  678-608-2775 .

TAX SECRET #3

PAYROLL TAXES NOT BEING PAID ON TIME

[WARNING:  All check signers on company Bank accounts

can be held responsible for payroll taxes!]

If you are a check signer on the company checking account, it is your responsibility to make sure all payroll taxes are paid to the IRS monthly.

Sometimes businesses get behind on the payroll taxes due to cash flow problems. The penalties and interest assessed by the IRS are excessive for this type of delinquency. These problems worsen with IRS penalties and interest, and the total amount owed can grow by 50% to 75% in a short period of time. If the Company is in cash flow trouble or is approaching the DANGER ZONE, it may never be able to pay off the total amount owing. Each check signer listed on the bank signature card is responsible for the tax; this often includes spouses, secretaries, employees, relatives, office managers or yourself.

HEADS UP:  You should get all non-essential check signers deleted from the bank signature cards before the company gets into trouble.

The IRS takes a very serious approach to collecting delinquent payroll taxes and may levy or seize company assets in short order. The best advice I can give to you if you find yourself in this situation is, DO NOT meet with the IRS Revenue Officer who calls or comes to the door to collect these taxes. Often, how you answer the first 5-10 questions they may ask you will determine whether you stay in business and if you or others will become personally responsible for the payroll taxes. One of the most important services we offer our clients is to meet with the IRS officers ourselves. This allows our clients to continue concentrating on running their business and improving the cash flow.

In my experience, I rarely have seen a good outcome when the Client meets with the IRS Revenue Officer.