Welcome Brown Bag Lunch Series START, MANAGE, GROW

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Presentation transcript:

Welcome Brown Bag Lunch Series START, MANAGE, GROW Tuesday, May 1, 2012 presented by Welcome ALEXANDRIA Small Business Development Center Brown Bag Lunch Series Today’s Topic: Employee vs. Independent Contractor Catherine Pennington & Karen Urcia Renner & Company CPA, P.C. START, MANAGE, GROW your business series

IRS FOCUS ON COMPENSATION Catherine Pennington, CPA cpennington@rennercpa.com Karen Urcia kurcia@rennercpa.com Renner and Company, CPA 700 North Fairfax Street, Suite 400 Alexandria, VA 22314

Topics we will discuss: Benefits of being an Employee or Independent Contractor Criteria for choosing one or the other IRS requirement If you are wrong, how to fix it Case study

Employee vs. Independent Contractor Why do I care? Benefits of being an Employee Benefits of being an Independent Contractor

Employee vs. Independent Contractor Three key considerations Behavioral control Risk of financial loss Nature of relationship

Control Who controls the HOW of a job Instructions? Training? Facilities/Tools When/Where

Risk of Loss or Profit Is it present? Who is responsible for expenses? Did IC make a substantial investment?

Nature of Relationship Is there a Written Contract Are Employee-type benefits provided Are the services key activities of the organization Permanence of the relationship

Classify workers correctly Avoid Surprises Classify workers correctly

What to file with IRS Employees: Independent Contractors: Form 941 and State filings Deposit payroll taxes regularly W-2 at the end of year Independent Contractors: 1099-misc at the end of the year (no payroll tax deposit)

Independent Contractors Obtain a W-9 (Request for Taxpayer Identification Number and Certification) from the contractor Issue 1099-misc at the end of the year Or withhold and remit back-up withholding of 28% of payment

1099-Misc Form 1099-Misc Filing Requirement Report payments of $600 or more paid to non-employees each year Filing deadline: For 2012 – to independent contractors by January 31, 2013 to IRS by February 28, 2013

How to fix it? Misclassification of Employees Relief provisions Misclassified workers can file social security tax form Voluntary classification settlement program More info on IRS website: http://www.irs.gov/businesses/small/article/0,,id=99921,00.html

CASE STUDY Small Consulting Company Restaurant Person wants to be an independent contractor Restaurant Struggling student Retired Federal Employee Wants FICA Employee wants additional duties on 1099 Must all payments to employees go on W-2

Conclusion

Questions?

START, MANAGE, GROW your business series Upcoming Events Brown Bag Lunch Series – Tuesday, June 5th Noon – 1:00 PM at AEDP/SBDC Offices, 625 N. Washington Street, Suite 400 Topic: “Get More Out of Your Day” Business Development Roundtable – Tuesday, June 19th Noon – 1:00 PM at the new AEDP/SBDC Offices, 625 N. Washington Street, Suite 400 Topic: “How to Make Referral Networking Work for You” START MANAGE GROW Workshop Federal Contracting Mini-Series - Tuesday, June 12th 9:00 – 11:00 AM at AEDP/SBDC Offices, 625 N. Washington Street, Suite 400 Topic: “Doing Business with the City Workshop” www.AlexandriaSBDC.org