William and Sherri Troutman with Steven Brewer, CPA

 More requirements for an employee. Tax withholding, employer paid payroll taxes and workers compensation insurance  As independent contractor, company has little or no obligation to worker after job done. Paid for job only.  Employee more costly. Usually costs 20% more than just the gross hourly wage or commission  “Hot Button” issue with IRS on audits. Can be costly if not properly classified.

 Common law definition An employee is “anyone who performs services for you and you can control what will be done and how it will be done”.  If you control the details of how the services are performed then the worker is an employee.

 If you bring in a worker for your business and you only have the right to control or direct only the result of the work and not what will be done and how it will be done then in general the worker is considered an independent contractor

 Common law looks at 3 factors in detail Behavioral Financial Type of Relationship

 Behavioral Type of Instructions Given Degree of Instruction Evaluation System Training

 Financial Investment Unreimbursed Expenses Profit/Loss Opportunity Services Marketed to Public Method of Payment

 Type of Relationship Contracts Employee Benefits Permanency of Relationship Service Key to Business

 Withholding of Taxes  Employer Paid Payroll Based Taxes  Proper Paychecks  Remittance of payroll taxes  Filing of Payroll Returns  Year End W-2s and Returns  Workers’ Compensation Insurance  At this point, a lot of potential employers “throw up their hands”.

 Individual/Sole Proprietorship Completed W-9 Track payments during year $600 or more requires reporting to IRS  Certificate of Insurance  Other Documents

 ABC Inspection LLC Hiring first worker. Additional inspector. Indefinite period of employment Daily schedule Trained as to ways of the owner Provides all tools, computer, software and uniforms Business Cards with ABC name ABC handles all appointments and billing Report issued by ABC Inspections LLC

 ABC Inspection LLC needs building renovated  One time job. Hired Dick Smith  Flat fee payment. Completion date set.  ABC has final approval of renovation.  Smith responsible for his own time, materials, tools and how he is to meet ABC’s expectations.  No further obligations to Smith once job completed.

 Proper classification is important.  Control is most important factor. More control makes a worker more of an employee. Control has several sub factors to look at in making determination.  “Hot button” issue with IRS.

 Steve is a CPA located in Salem, Indiana.  Over 30 years of experience.  Works with small business on a variety of levels.  Provides payroll services, both live and after the fact, to small business.  Uses cloud based system to work with clients in a many states.  at  Phone  Website