(and the implications of handling either inappropriately)

 It is VERY important to have a conversation with your Accountant and/or Lawyer to determine what type of entity you should choose for your business, not only for liability purposes, but also for tax implications  Types of entities include:  Sole Proprietorship  LLC  S-Corp  C-Corp

 IRS Common Law Test  This is a test that helps determine whether one is a 1099 independent contractor or an employee  Questions include:  Does the worker stand to realize a profit or suffer a loss as a result of his/her services?  Does the worker have control over his/her own schedule?  Is work conducted on the business’s premises or can it be conducted off the premises?

Compliance Workers Compensation Department of Labor (DOL) New Hire Reporting Human Resources Immigration Taxes Federal Income Tax (FIT) State Income Tax (SIT) Federal Unemployment Tax (FUTA) State Unemployment Insurance (SUI) FICA (Social Security and Medicare)

 Workers Compensation is a form of insurance that provides wage replacement and medical benefits for employees who are injured in the course of employment, in exchange for mandatory relinquishment of the employee’s right to sue his or her employer for the tort of negligence

 When you file your Quarterly 941’s with the Fed & State, the State checks to determine that you have an active Workers Comp policy  If you do not have an active policy, then you will receive a VERY scary letter that provides you with your court date and notifies you that your fine will be up to $10,000

 The Department of Labor exists at both the federal and state level and is responsible for promoting working conditions of wage earners in the United States

 Labor Law Posters are for your employees’ benefit to inform them on their rights and must be in an area where they are visible every day  Labor Law Posters include: Minimum Wage Laws, Non-Discrimination Notices, Equal Employment Opportunity, OSHA, Workplace Harassment…and how to report violations

 Fines range from a warning to $17,000  States across the U.S. are increasing the number of Department of Labor Auditors

 New Hire Reporting (NHR) is the reporting of an employee’s information (W-4/I-9) to the State in the timeframe required by law  In the State of Maine you have 7 days to report your new hires  New Hire Reporting is Federal law, supported by each state

 If an employee has a garnishment and/or outstanding unemployment claim and they are not reported to the State, then the employer can be held liable for garnishments not withheld from the employee

 Human Resources is the department of a company responsible for employee relations  In most small businesses the Business Owner functions as the Human Resources Department  On the most basic level, the Business Owner will want to make sure that the business is in compliance and up-to-date with all workplace laws and legislative and tax changes

 Important to have up-to-date Employee Handbooks and Job Descriptions  Employee Handbooks are a means of relaying your policies and procedures to your employees  Job Descriptions provide the specific job functions and expectations of the employee

 The average law suit is over $300,000

 The total amount of wages and salaries paid by a company to its employees  The financial records for employee wages/salaries, withholdings, deductions, bonuses, and any other items on an employee’s paycheck  Calculation of taxes due by both the employee and employer and the necessary payment of those taxes

 FIT, SIT, FUTA, SUI, FICA  The above taxes are all different percentages of gross payroll (minus any pre-tax deductions) and are due at various times  FIT and SIT rates are based on total income and current tax tables  Lookback Period determines deposit frequency  Example: July 1, 2010 – June 30, 2009 – four quarter lookback of the previous year  If you reported $50K or less you are a monthly depositor; over $50K you are a semi-monthly depositor

 Unemployment Taxes are due on a Quarterly basis  The amount of State Unemployment Tax owed is based on your Experience Rate  An Experience Rate is a percentage assigned to a business based on its industry and number of years in business--this rate changes every year

 Federal Income Contributions Act (FICA)  A payroll tax imposed by the federal government on both employers and employees to fund Social Security and Medicare  In 2011, FICA rates for Employers are:  6.2% for Social Security  1.45% for Medicare  Totaling 7.65%  In 2011, FICA rates for Employees are:  4.2% for Social Security  1.45% for Medicare  Totaling 5.65%

 If you pay your taxes by the due dates and accurately, but do not include the proper filing, then you may pay a penalty  Failure to File Penalty is usually 5% for each month or part of a month that a return is late, but not more than 25%  Failure to Pay Penalty is ½% of unpaid taxes for each month or part of a month after the due date that a tax is not paid  Combined Penalties are reduced by the Failure to Pay Penalty (so 4 ½% to 24 ½%)

 Accuracy Penalty is equal to 20% of the underpayment  Don’t forget interest!  It often takes the government several months to realize that there was an inaccuracy and/or late payment/filing, which means that you will also pay interest  And if you do not pay your taxes at all, what happens?  The IRS will eventually take control of your bank account(s) and you will go to jail

Anthony Taliento District Manager ADP Small Business Services (207) THANK YOU!!!