It’s Tax Season! How is Your Business Classifying Independent Contractors and Employees?

 

There has always been a battle between the W-2 and the 1099 people who assist your business, however, the federal government and many states in need of additional revenue are starting to really crack down and audit businesses classifications – and hefty penalties can be associated with those (think back pay, taxes, liability for workers comp, company benefits including healthcare, fines and interest penalties). It’s certainly not pleasant to think about…and you will want to be prepared for a potential audit. As the old saying goes, it’s not a matter of IF, you will get an audit, but WHEN you will get an audit.

The IRS has a 20 factor test (Rev. Rul. 87-41 provides 20 common law attributes); the Department of Labor has an “Economic Reality Test” that touches on about 7 elements; and the State of Arizona likes to consider the totality of the circumstances and puts an emphasis on the right of control without any particular single factor being conclusive.

In this situation it is better to be proactive than reactive…it could save you $$$ and possibly even your business. Plus, there are some safe harbors and ways to help address the issue ahead of time that may save you big $$$.

If you aren’t sure whether you have your Independent Contractor classified correctly, and you are an Arizona resident/business, I can assist you in walking through the elements. You can also file an SS-8 Form to have the IRS make a determination for you. That form can be found at the following URL: https://www.irs.gov/uac/About-Form-SS8.

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Tax Season is Here: Identity Protection Tips!

I have been hearing more and more about people getting calls from people, acting like they are IRS agents, and threatening all kinds of crazy stuff.  In order to help out I have compiled some information that may be helpful to you.

1) The IRS is not going to e-mail you or contact you through social media and ask you for personal or financial information! If you are unlucky enough to get one of these things, forward that e-mail to phishing@irs.gov.

2) The IRS is not going to call you out of the blue and threaten you with arrest, deportation or some other crazy crap if you don’t pay! If you get a call from someone claiming to be an agent, report that call to the Treasury Inspector General for Tax Administration at 1-800-366-4484 or online at:https://www.treasury.gov/tigta/contact_report_scam.shtml

3) The IRS is not going to call and request financial information in order to send you a refund. If you get a call from someone asking for this kind of information report that call to the Treasury Inspector General for Tax Administration at 1-800-366-4484 or online at:https://www.treasury.gov/tigta/contact_report_scam.shtml

4) The IRS has their own legitimate website. It starts with “www.irs.gov“. If you stumble across any website that claims to be the IRS but doesn’t start with the “www.irs.gov” it is NOT the IRS. If you see this you should forward the impersonating link that you find to phishing@irs.gov.

Don’t just ignore these people…  Report them.