By Bonnie Buol Ruszczyk
Guest post by Cathy Iconis, CEO, Iconis Group
Now, I don’t usually talk about tax stuff – I leave that to the experts – but this is big news and business owners should pay attention! Have you heard that the government is cracking down on unlawful contractor payments? Well, they are, and I’ve seen glimpses firsthand.
What is all this contractor talk about? The government isn’t too fond of the fact that many companies are avoiding taxes by classifying their workers as contractors and paying them on a 1099 status to avoid payroll taxes when they are really employees. Basically, if someone is an employee, you MUST take the taxes out of their paycheck and submit them to the proper governmental entities. It’s a cost of doing business. Business owners need to stop being lazy about it by pushing the burden of paying taxes to their employees. It just isn’t right or fair to them.
The IRS has issued guidance on how to decide if your staff member is an employee or a contractor (check out their page on the subject here). My advice? If you feel like you are in a gray area, go ahead and treat your worker as an employee.
A few weeks ago, the IRS just released a new program to help employers get it right. It’s part of their “Fresh Start” initiative. According to their site, “This settlement program provides certainty and relief to employers in an important area. This is part of a wider effort to help taxpayers and businesses to help give them a fresh start with their tax obligations.”
Now, if you want to participate, you need to do it quickly because government agencies are cracking down. Why? Because it brings these agencies money that they desperately need, not to mention business owners are breaking the law! To be eligible, an applicant must:
- Consistently have treated the workers as non-employees in the past
- Have filed all required Forms 1099 for the workers for the previous three years
- Not currently be under audit by the IRS, the Department of Labor or a state agency concerning the classification of these workers
If you are interested in applying for the program, check out the IRS site and fill out Form 8952. I would also suggest contacting your tax preparer to get advice on how to get your “Fresh Start.”
My opinion? Stop being lazy. You have the drive to be in business and create a great company. Do it right and take on ALL of the responsibilities of owning your business.
Cathy Iconis is founder and CEO of Iconis Group, LLC. Cathy created Iconis Group with the desire to help small businesses better manage their financials and take the worry out of their accounting. Sometimes referred to as a Virtual CFO, Cathy develops close relationships with her clients, becoming intimately knowledgeable of their processes and as instrumental as any member of a company’s full-time team.