Posts Tagged ‘irs regulations’
Worker Status – When is a Worker an Employee?
Unless the worker is an independent contractor, the answer is always!
There are specific criteria to determine if a worker is an employee or an independent contractor. The key word in that sentence is “independent.” The most important factor is who is in control. This is covered in more detail in our March 2010 article Employee or Independent Contractor?
But there are several other issues that can also trip you up.
Hire Your Child
If you are a small business owner there could be many financial benefits to hiring your child. If your business is a sole proprietorship, you pay no payroll taxes on your child’s wages if that child is under age 18. Your child could pay no payroll taxes and no federal income taxes if wages do not exceed the 2010 standard deduction of $5,700 for a single taxpayer.
Record keeping is crucial. You need accurate records showing hours works and tasks performed. The wages must be reasonable – what would you pay someone else? Keep records showing the wages were actually paid to your child.
Be sure to check with your CPA before hiring your child to understand the implications for all federal and state taxes you and your child may incur. Other rules govern corporations, partnerships and limited liability companies (LLCs).
IRS issues Forms, Instructions for HIRE Act Employer Tax Incentives
Social Security Tax Exemption
There are new tax benefits for employers in 2010 from the Hiring Incentives to Restore Employment (HIRE) Act. Qualifying employers have an exemption on their matching share of the 6.2% social security tax paid to qualifying employees effective on wages paid from March 19, 2010 through December 31, 2010. This exemption is claimed on form 941 beginning with the quarter ending June 30, 2010.
Credit Card Receipts to be Reported to IRS
Proposed IRS regulations address reporting requirements for credit card and third-party network transactions (IR-2009-106; NPRM REG-139255-08). The IRS plans to require credit card and other firms that process transactions to report the annual gross network transactions to participating merchants and to the IRS.
Information reporting will begin to apply to 2011 transactions. Form 1099-K has been proposed for this purpose and is now available in draft form. Form 1099-K will be prepared for each calendar year and report the gross amount of transactions for the year and for each month of the year. The inclusion of monthly amounts on the return filed with the IRS and the copy furnished to the payee will help fiscal-year payees reconcile payment card and third-party network transaction receipts.
The gross amount of a transaction is not reduced by fees, charge backs, refunds, or any other amount. The IRS will use the reports as it does W-2s and 1099s. A company reporting gross receipts different from those in these reports can be subjected to auditing to explain the differences.
