1. 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

3. IRS FOCUS ON COMPENSATION
Catherine Pennington, CPA
Karen Urcia
Renner and Company, CPA
700 North Fairfax Street,
Suite 400
Alexandria, VA 22314

4. 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

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

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

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

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

9. 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

10. Classify workers correctly
Avoid Surprises
Classify workers correctly

11. 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)

12. 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

13. 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

14. 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:

15. 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

16. Conclusion

17. Questions?

18. 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”