Your government is out to help you know more about those people who work for you. You may think they are Independent Contractors for whom you only need to deliver a Form 1099 at the end of the year. Be very careful, because the IRS and the Labor Department may classify those people as W-2 employees who are subject to withholdings, payroll taxes, minimum wage and wage and hour considerations. The distinction is not always simple. Such a reclassification after the fact can create some substantial wage and tax liabilities for you which cannot usually be recouped from the employee. Things such as overtime, employee benefits, employment discrimination and equal pay may apply to you even though you didn’t think you were subject to those requirements because the person you engaged was an independent contractor. For the past several years, the government has been cracking down on efforts to treat employees as contractors, leaving a number of businesses with the need to write a big check to fight the IRS or to pay a lawyer. While we don’t mind people paying a lawyer, we would rather see you apply your hard earned money to have us help you on more productive issues.
For those of you who classify the people who work for you as employees, remember that in addition to IRS requirements, you also must maintain a federal Form I-9 for every employee, or be subject to some substantial fines and penalties by the government’s Immigration and Customs Enforcement (ICE) division. Surprise audits of employment status and I-9’s are becoming more prevalent all the time. Keeping good accounting and employment records may allow you the comfort of opening your books to the feds without an accompanying panic call to us.
The alphabet soup of government agencies such as ICE, IRS and the Labor Department are willing to explain to you things you didn’t realize about your employment practices… together with accompanying fines, penalties and legal expense if you don’t plan ahead. We look forward to helping you navigate these challenges. Just call us.
