Small Business
The most frequently asked tax questions related to Small Business
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Answer Tax QuestionsPenalties for treating an employee as an independent contractor
Asked Saturday, September 30, 2000 by an anonymous user
Yes. The federal penalties are steep.
If an owner treated the worker as an independent contractor but did not file 1099s, the IRS can levy severe penalties against you, including a 3 percent penalty for failure to withhold income tax.
You would also owe the full employer portion of Social Security and Medicare taxes plus 40 percent of the employee's portion, which comes to 8.68 percent for Social Security and 2.03 percent for Medicare.
Please consult with a CPA in your state to determine any state penalties which could be assessed.
If an owner treated the worker as an independent contractor but did not file 1099s, the IRS can levy severe penalties against you, including a 3 percent penalty for failure to withhold income tax.
You would also owe the full employer portion of Social Security and Medicare taxes plus 40 percent of the employee's portion, which comes to 8.68 percent for Social Security and 2.03 percent for Medicare.
Please consult with a CPA in your state to determine any state penalties which could be assessed.
Changes in the law - treatment as an independent contractor
Asked Saturday, September 30, 2000 by an anonymous user
Yes. Section 530 of the Internal Revenue Code provides an exclusion that pertains to a worker who is not treated as an employee.
The exclusion mandates that: that the employer never treated the worker as an employee; did not hold out any other worker holding a similar position as an employee; filed form 1099 in a timely fashion for that worker; and had a reasonable basis for treating the worker as an independent contractor.
The exclusion mandates that: that the employer never treated the worker as an employee; did not hold out any other worker holding a similar position as an employee; filed form 1099 in a timely fashion for that worker; and had a reasonable basis for treating the worker as an independent contractor.
independent contractor - advantage
Asked Saturday, September 30, 2000 by an anonymous user
The only tax advantage to being treated as an independent contractor is that your business expenses are not subject to a 2% limitation of your adjusted gross income. The self-employment taxes you pay are net of any business expenses. Independent Contractors who are sole proprietors must file Schedule C.
Independent contractor non-receipt of Form 1099
Asked Saturday, September 30, 2000 by an anonymous user
Although you should have received a Form 1099, there is no excuse for not reporting income you earned during the year.
The burden of reporting is your responsibility, whether you receive a Form 1099 or not.
The penalties for failure to report income can be severe and can be deemed criminal in the worst of cases. Always report all income earned.
The burden of reporting is your responsibility, whether you receive a Form 1099 or not.
The penalties for failure to report income can be severe and can be deemed criminal in the worst of cases. Always report all income earned.
Safe Harbor rules for treating an employee as an independent
Asked Saturday, September 30, 2000 by an anonymous user
There are three safe harbor provisions: judicial precedent, failure of the IRS to question the status in a prior audit, and industry practice.
To qualify for Safe Harbor protection, you must satisfy just three requirements: you must have filed all required 1099-MISC forms reporting to the IRS your payments to the workers in question you consistently treated the workers involved and others doing substantially similar work as ICs, and you had a reasonable basis--that is, a good reason--for treating the workers as Independent contractors.
To qualify for Safe Harbor protection, you must satisfy just three requirements: you must have filed all required 1099-MISC forms reporting to the IRS your payments to the workers in question you consistently treated the workers involved and others doing substantially similar work as ICs, and you had a reasonable basis--that is, a good reason--for treating the workers as Independent contractors.
Business trip - Tips
Asked Monday, September 25, 2000 by an anonymous user
The following unreimbursed business trip costs are deductible: tips, telephone, fax, airplane, railroad, taxi, other transportation fees, hotel and lodging, meal costs
(50% deductible),laundry and cleaning, and entertainment.
All business trip deductions should be listed in a diary stating the time, place and business purpose of the meetings.
All business trip deductions should be listed in a diary stating the time, place and business purpose of the meetings.
Nurse - physician's assistant costs
Asked Saturday, September 23, 2000 by an anonymous user
Physician's assistants and practical nurses are subject to different certification and registration requirements under state law and they perform different duties.
The costs would be considered as qualifying for a new business or profession and therefore not deductible.
The costs would be considered as qualifying for a new business or profession and therefore not deductible.
Safe Deposit Box
Asked Saturday, September 23, 2000 by an anonymous user
If the Safe Deposit Box is used to store investment documents such as securities. It is a miscellaneous itemized deduction entered on IRS Schedule A, subject to the 2% limitation.
Subscriptions
Asked Saturday, September 23, 2000 by an anonymous user
Expenses for magazines, books, newsletters, and investment services are deductible as a miscellaneous itemized deduction, subject to the 2% limitation on Schedule A.
Investment management or investment planner fees are also deductible.
Investment management or investment planner fees are also deductible.
