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:
- 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.
- 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.