FinanceRegs.com » Summer staffing requires extra care to avoid this tax snafu

Summer staffing requires extra care to avoid this tax snafu

May 23, 2008 by Carol Katarsky
Posted in: Communication, Hiring & training staff, In this week's e-newsletter, Internal controls, IRS regs, Latest news & views, Tax compliance

With summer’s arrival, your company probably also has its share of interns, temps and assorted part-timers. And each comes with potential tax implications. The biggest potential issue: Mistakenly classifying a worker as an independent contractor (IC), when he or she should really be an employee.

Even if the worker prefers to be treated as an IC, that doesn’t mean IRS will agree. And even one misclassification can cost you big in terms of back employment taxes, interest and penalties.

To steer clear of any compliance issues, you’ll want to do two things:

  1. Establish that you’re following IRS’ guidelines for who’s an employee, and who’s an IC.  That means reviewing things like how much control the worker has, whether she has a chance to make a profit (or take a loss) and how permanent the business relationship is.
  2. Document their IC status. ICs can (and usually do) work for other companies as well. Keep a file of things like marketing materials, business cards, etc. to show that the worker isn’t reliant only on your company for his or her income.
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One Response to “Summer staffing requires extra care to avoid this tax snafu”

  1. Mike Harmon Says:

    I came across your blog on Technorati. Nice site layout. I will stop by and read more soon.

    Mike Harmon


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