Contractor vs Employee
Webinar Details $219
- Rated:
- Webinar Length: 100 Minutes
- Guest Speaker: Chuck Borek
- Topic: Human Resources, Taxation and Accounting
- Credit: CPE 2.0, ATATX 1.5, IRS 2.0, ATAHR 1.5, ATAPR 1.5
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IRS and State Agencies have increased their audits of workers classified as Independent Contractors. Why, because both Agencies are looking for more revenue without raising taxes. Misclassification of workers by payees are an easy IRS target. As a result, companies need to be especially careful to ensure that their employee vs contractor classifications are in compliance with the law.
Learning Objectives:
- IRS 20 factor test for identifying independent contractors.
- Purpose of Form 8919
- Purpose of SS-8
- Purpose of Form 8952
- Red flags that attract attention of IRS
- How is a company most likely to be “caught?”
- The “red flags” companies should look for when performing a self-audit.
- How to appeal an IRS Employee’s decision – the IRS’s Voluntary Classification Settlement Program Objectives
- To provide you the tools to avoid contractor vs employee issues.
- To provide you the tools to handle an employee vs contractor audit.
- To provide you the tools to appeal and auditor’s decision.
- Introduction
- Service Recipient - Service Provider 00:04:42
- Issues Upon Hiring Employees 00:06:53
- Employment Eligibility Verification: Form I-9 00:12:23
- Employment Eligibility Verification: Form I-9 Cont’d 00:14:33
- E-Verify 00:17:01
- New Hire Reporting 00:19:04
- New Hire Reporting - Reporting New Hire Information 00:20:35
- New Hire Reporting - Penalty 00:23:07
- Independent Contractor Consequences 00:25:15
- Form 1099-NEC 00:30:08
- Just The Facts 00:31:15
- Officers 00:34:00
- 20 Common Law Factors 00:35:07
- Extent of Employer Instructions 00:38:41
- Training of Service Provider 00:40:06
- Integration of Work With Business 00:40:52
- Services Required To Be Rendered Personally 00:41:48
- Responsibility For Hiring Of Assistants 00:43:30
- Continuing Relationship 00:44:24
- Who Sets Hours Of Work 00:45:26
- Whether A Full-Time Commitment is Required 00:46:11
- Whether Work Must Be Done On Premises 00:46:52
- Who Sets Order or Sequence of Work 00:48:33
- Required Reports 00:49:40
- Manner of Payments 00:49:57
- Responsibility for Expenses 00:51:29
- Who Provides Tools and Materials 00:52:28
- Whether an Investment is Required 00:53:19
- If a Profit or Loss is Possible 00:53:58
- Services Provided to Multiple Employers 00:54:58
- Whether Services Are Offered to the Public 00:55:09
- Right to Fire 00:55:32
- Right to Quit 00:55:36
- Three IRS Categories 00:58:28
- Behavioral Control 00:59:18
- Financial Control 01:00:40
- Relationship of the Parties 01:01:25
- Form SS-8 01:03:37
- Section 530 Relief 01:08:55
- Section 530 Relief Cont’d 01:10:52
- In General 01:12:49
- Other Reasonable Basis 01:15:37
- Employees Covered 01:17:50
- Gig Economy 01:19:43
- Gig Economy - Worker Classification 01:22:46
- Form 8919 01:24:12
- Form 8919 Prerequisites 01:24:54
- State “ABC” Test 01:25:54
- Comparison Map 01:27:13
- Form W-2 - Statutory Employees 01:28:35
- Agent or Commission Drivers 01:29:25
- Full-Time Life Insurance Sales 01:29:54
- Home Workers 01:30:13
- Traveling or City Salesperson 01:30:44
- Statutory Employee Consequences 01:3
- Statutory Non-Employees 01:31:09
- Statutory Non-Employees 01:32:04
- Direct Seller 01:32:22
- Real Estate Agents 01:32:36
- Companion Sitters 01:34:10
- Attendee Questions 01:38:07
- Presentation Closing 01:42:25
- Audit 00:14:17, 01:08:47, 01:10:15
- Backup Withholding 00:30:33
- Common Law 00:32:21, 00:35:15, 01:17:55, 01:27:42
- Department of Labor (DOL) 00:
- Department of Labor (DOL) 00:14:13
- E-Verify 00:17:01
- Expense 00:51:34
- Federal Insurance Contributions Act (FICA) 00:27:12, 01:24:38, 01:31:23
- Federal Unemployment Tax Act (FUTA) 00:27:40, 01:31:
- Form 1099-NEC 00:30:18
- Form 8919 01:24:14, 01:25:33
- Form I-9 00:13:21, 00:25:19
- Form SS-8 01:03:39, 01:04:23
- Form W-2 00:30:17, 01:18:44, 01:28:35, 01:31:12
- Form W-4 00:26:40
- Garnishment 00:19:56
- Independent Contractor 00:05:42, 00:07:11, 00:23:32, 00:25:04, 00:28:07, 00:31:21, 00:34:12, 00:39:26, 00:49:48, 00:53:06, 01:13:22, 01:22:25, 01:37:15
- IRS 20-Factor Test 01:23:33, 01:27:34
- Minimum Wage 00:08:34
- Nonprofit Corporation 00:05:01, 00:34:25
- Private Letter Ruling 01:04:05
- Schedule C 01:18:27, 01:29:00, 01:31:47
- Section 530 Relief 01:08:55
- Sole Proprietor 00:04:59, 00:13:10
- State “ABC” Test 01:25:56
- Statutory Employee 01:18:01, 01:28:41, 01:30:11, 31:09
- Statutory Nonemployee 01:32:06
- Wages 00:19:55
Audit: A formal examination of an organization's or individual's accounts or financial situation
Backup Withholding: Backup withholding is the tax that is levied on investment income, at an established tax rate, as the investor withdraws it. Backup withholding helps to ensure that government tax-collecting agencies (such as the IRS or Canada Revenue Agency) will be able to receive income taxes owed to them from investors' earnings. (www.investopedia.com)
Common Law : In law, common law is the body of law derived from judicial decisions of courts and similar tribunals. The defining characteristic of “common law” is that it arises as precedent.
Contractual Liability: Contractual liability involves the financial consequences emanating from liability, not the assumption of the indemnitee's liability itself. A common phrase found in contracts states that one party agrees to hold another party harmless for any injuries, accidents, or losses that occur while the contact is in effect.
Department of Labor (DOL): The United States Department of Labor is a cabinet-level department of the U.S. federal government responsible for occupational safety, wage and hour standards, unemployment insurance benefits, reemployment services, and some economic statistics; many U.S. states also have such departments.
E-Verify: E-Verify is an Internet-based system that compares information entered by an employer from an employee's Form I-9, Employment Eligibility Verification, to records available to the U.S. Department of Homeland Security and the Social Security Administration to confirm the employment eligibility
Expense: Offset (an item of expenditure) as an expense against taxable income.
Federal Insurance Contributions Act (FICA): The Federal Insurance Contributions Act is a United States federal payroll contribution directed towards both employees and employers to fund Social Security and Medicare—federal programs that provide benefits for retirees, people with disabilities, and children of deceased workers.
Federal Unemployment Tax Act (FUTA): The Federal Unemployment Tax Act (FUTA) is a federal law that imposes an unemployment tax on employers. The FUTA tax funds the federal government's oversight of each state's unemployment program. Only employers pay FUTA tax. You must deposit the tax quarterly and file an annual form.
Form 1099-NEC: In the context of 1099 tax filing, NEC stands for “Nonemployee Compensation” (the first letters of the three words None, Employee and Compensation). Most tax payers recognize NEC as box 7 on Form 1099-MISC. NEC is used to report income paid to independent-contractors / the-self-employed (referred to as 1099 employees for simplification purposes). So, while employers report income that gets paid to employees on Box 1 (Wages, tips, other compensation) of the W2 form, payers report income that gets paid to none-employees on Box 7 (NEC) of the 1099-MISC form. As an individual, if you received form 1099-MISC instead of Form W-2 then the payer did not consider you an employee and did not withhold income tax or social security and Medicare tax.
Form 8919: Use Form 8919 to figure and report your share of the uncollected social security and Medicare taxes due on your compensation if you were an employee but were treated as an independent contractor by your employer. By filing this form, your social security earnings will be credited to your social security record.
Form I-9: Form I-9 is used for verifying the identity and employment authorization of individuals hired for employment in the United States. All U.S. employers must ensure proper completion of Form I-9 for each individual they hire for employment in the United States. This includes citizens and noncitizens.
Form SS-8: Firms and workers file Form SS-8 to request a determination of the status of a worker for purposes of federal employment taxes and income tax withholding. After a worker files Form SS-8, the IRS sends a letter to the business. It identifies the worker and includes a blank Form SS-8. The business is asked to complete and return it to the IRS, which will render a classification decision. But the Form SS-8 determination process doesn't constitute an official IRS audit.
Form W-2: Form W-2 is an Internal Revenue Service tax form used in the United States to report wages paid to employees and the taxes withheld from them. Employers must complete a Form W-2 for each employee to whom they pay a salary, wage, or other compensation as part of the employment relationship. - Wikipedia (https://en.wikipedia.org/)
Form W-4: Form W-4 (otherwise known as the "Employee's Withholding Allowance Certificate") is an Internal Revenue Service (IRS) tax form completed by an employee in the United States to indicate his or her tax situation (exemptions, status, etc.) to the employer.
Garnishment: A legal summons or warning concerning the attachment of property to satisfy a debt
IRS 20-Factor Test: The IRS 20-Factor Test commonly referred to as the “Right-to-Control Test,” is designed to evaluate who controls how the work is performed. According to the IRS's Common-Law Rules, a worker's status corresponds to the level of control and independence they have over their work.
Independent Contractor: An independent contractor is a person or entity contracted to perform work or provide services to another entity as a non-employee. As a result, independent contractors must pay their own Social Security and Medicare taxes. - Investopedia (https://www.investopedia.com/)
Liability: In financial accounting, a liability is defined as the future sacrifices of economic benefits that the entity is obliged to make to other entities as a result of past transactions or other past events, the settlement of which may result in the transfer or use of assets, provision of services or other yielding of economic benefits in the future.
Nonprofit Corporation: A nonprofit organization, also known as a non-business entity, not-for-profit organization, or nonprofit institution, is an organization dedicated to furthering a particular social cause or advocating for a shared point of view.
Private Letter Ruling: Private letter rulings, in the United States, are written decisions by the Internal Revenue Service in response to taxpayer requests for guidance.
Section 530 Relief: Section 530 is a relief provision that terminates a taxpayer's employment tax liability with respect to an individual not treated as an employee if three statutory requirements are met: 1) reporting consistency; 2) substantive consistency; and 3) reasonable basis.
Sole Proprietor: A business that legally has no separate existence from its owner. The sole proprietorship is the simplest business form under which one can operate a business. The sole proprietorship is not a legal entity. It simply refers to a person who owns the business and is personally responsible for its debts.
State “ABC” Test: Many states use the ABC test to determine if a worker is an independent contractor or an employee. Thirty-three states use this test as a form of worker classification.
Statutory Employee: A statutory employee is an independent contractor under American common law who is treated as an employee, by statute, for purposes of tax withholdings. For a standard independent contractor, an employer cannot withhold taxes.
Statutory Nonemployee: A statutory nonemployee is a worker classification that aligns with independent contractors. Businesses that employ statutory nonemployees do not need to withhold federal income or FICA (Social Security and Medicare) taxes from their wages.
Wages: Are total compensation paid for services, whether in the form of hourly wages, salaries, commissions, or bonuses, including the cash value of remuneration paid in a form other than cash.
