|
|
Misclassifying Workers as Independent Contractors Can Be A Costly Mistake
Using independent contractors in your business can save money. Independent contractors do not receive typical company benefits such as vacation, sick pay or health insurance/retirement benefits. Plus, employers don’t pay social security taxes (FICA), or provide unemployment benefits. However, it is easy to blur the line between a true independent contractor and employee and the IRS is cracking down.
In order to be considered an independent contractor, a worker should meet certain criteria. Control is one of the primary determinators. What is your level of control over the worker? An independent contractor determines how and when work will be performed whereas an employee’s work parameters are established by the employer. For example, if you require a worker to attend regular meetings, work set hours and use specific materials and equipment, then in most cases that worker is an employee because you are exercising significant control over his/her job performance.
Other factors include such things as:
- Working relationship. Does the worker have other clients with whom he works or does he work exclusively for you? An independent contractor is in business for himself so he should have other clients or at least be in the market to acquire other business opportunities.
- Work hours. An independent contractor should, in most cases be able to set his own work schedule. As long as the contractor meets the deadline established by the client, he can decide his own work schedule.
- Work location. Generally, an independent contractor provides for his own work location, materials and equipment. In other words, his primary office is not located at your company’s facility.
- Expenses. Employees typically submit their work-related expenses to their employer for reimbursement. An independent contractor, however, generally absorbs expenses as part of the cost of doing business.
- Taxes. An independent contractor pays his own taxes by filing quarterly estimated tax returns. Your company does not withhold taxes.
If the IRS determines you have misclassified a worker as an independent contractor rather than an employee, get out your checkbook. You may be charged for back taxes, interest and penalties. In fact, there is even the possibility of criminal charges. And in some cases the misclassified worker has been able to sue the employer for lost benefits during the time in which he should have been considered an employee.
The IRS has a set of guidelines an employer can use to determine the proper status of a worker. If you are still uncertain, give us a call us.
While in the short-term, using independent contractors in your business may save you money, it could cost you significantly more in the long-term. Make sure you make the right choice.
(From business.gov article Misclassifying Workers as Independent Contractors Can Be Costly)
Should you have questions regarding this post or any other tax needs, contact us at Schutte & Hilgendorf, PLLC, Prescott accountants serving the greater Yavapai County with tax, accounting, auditing, and QuickBooks consulting expertise.
The HIRE act of 2010 also extends the $250,000 limit on first-year expensing for purchase of business equipment and machinery in 2010, (Known as Section 179). If the total cost of qualifying purchases in 2010 exceeds $800,000, the $250,000 Section 179 deduction is reduced.
The 50% bonus depreciation in effect in 2009 HAS NOT YET been extended to apply in 2010. The latest news we have received is that it is included in a bill that the Senate is considering, but has not yet passed. We are keeping an eye on the developments and will post new information to our website www.prescottaccountants.com as soon as it is available.
If you have any questions about how to apply this depreciation extension or any other aspect of the 2010 HIRE act, or just need tax planning assistance, please call Schutte & Hilgendorf, CPAs at 928-778-0079. We specialize in accounting, auditing, and tax planning and preparation for individuals and business in the great quad-city area.
On March 18, 2010, The HIRE Act was signed into law and provides some incentives for hiring and retaining previously unemployed workers.
Under the HIRE Act, employers who hire unemployed workers after February 3, 2010 and before January 1, 2011 are exempt from having to pay the employers share of Social Security taxes(6.2%) on the wages paid to the qualified employees after the March 18th effective date. The employer still withholds and pays the employee share of Social Security tax(6.2%) and both the employee and employer share of Medicare tax(1.45%).
Qualifying employees are those who certify to the employer on new Form W-11 that they did not work more than 40 hours in the 60 days prior to the hire date. If the new hire is replacing another worker, the exemption applies only if the worker left voluntarily or was fired for cause.
The credit is obtained by filing the new Form 941 for the 2nd quarter payroll tax reporting.
One additional credit will be available if the qualifying employee is retained for at least 52 consecutive weeks. The retention credit is taken in 2011 and will be the lesser of $1,000 or 6.2% of the wages paid to the worker during a 52 consecutive-week period.
If you need further information please contact us.
Should you have questions regarding this post or any other tax needs, contact us at Schutte & Hilgendorf, PLLC, Prescott accountants serving the greater Yavapai County with tax, accounting, auditing, and QuickBooks consulting expertise.
WASHINGTON ― Many small businesses and tax-exempt organizations that provide health insurance coverage to their employees now qualify for a special tax credit, according to the Internal Revenue Service.
Included in the health care reform legislation, the Patient Protection and Affordable Care Act, approved by Congress and signed by President Obama on March 23, the credit is designed to encourage small employers to offer health insurance coverage for the first time or maintain coverage they already have. In general, the credit is available to small employers that pay at least half the cost of single coverage for their employees.
“This credit provides a real boost to eligible small businesses by helping them afford health coverage for their employees,” said IRS Commissioner Doug Shulman. “We urge small businesses and tax-exempt employers to look closely at this important tax break — which is already effective — to see if they qualify.”
The maximum credit is 35 percent of premiums paid in 2010 by eligible small business employers and 25 percent of premiums paid by eligible employers that are tax-exempt organizations. In 2014, this maximum credit increases to 50 percent of premiums paid by eligible small business employers and 35 percent of premiums paid by eligible employers that are tax-exempt organizations.
The credit is specifically targeted to help small businesses and tax-exempt organizations that primarily employ low and moderate income workers. It is generally available to employers that have fewer than 25 full-time equivalent (FTE) employees paying wages averaging less than $50,000 per employee per year. Because the eligibility formula is based in part on the number of FTEs, not the number of employees, many businesses will qualify even if they employ more than 25 individual workers.
The maximum credit goes to smaller employers — those with 10 or fewer FTEs — paying annual average wages of $25,000 or less.
Eligible small businesses can claim the credit as part of the general business credit starting with the 2010 income tax return they file in 2011. For tax-exempt employers, the IRS will provide further information on how to claim the credit.
The IRS will use postcards to reach out to millions of small businesses that may qualify for the credit. The postcards will encourage small business owners to take advantage of the credit if they qualify.
(From IRS Issue Number IR-2010-38)
Should you have questions regarding this post or any other tax needs, contact us at Schutte & Hilgendorf, PLLC, Prescott accountants serving the greater Yavapai County with tax, accounting, auditing, and QuickBooks consulting expertise.
The public accounting firm, Schutte & Hilgendorf, announces the addition of Crystal Garcia to their staff. Hired in 2009, Crystal serves our small business and non-profit accounting clients by performing monthly and quarterly bookkeeping functions and preparing payroll and sales tax returns. Crystal has become our Certified QuickBooks Pro-Advisor, having completed 16 hours of intense online QuickBooks training. These skills have already proved invaluable to our many small busienss clients using QuickBooks.
Crystal was born in Big Bear California and moved to Prescott when she was 10 years old and is an alumni of Prescott High School. Crystal received her Associates Degree in Accounting from Yavapai College in December 2009 and aspires to obtain her Bachelor’s degree and sit for the CPA exam as soon as academically possible. Crystal will provide needed support during the busy tax preparation and auditing season starting in February. When not working or doing homework, Crystal likes to hike the outdoors and play softball on a local co-ed team. She is a member of Prescott Young Professionals.
Schutte & Hilgendorf is a full service firm with over 40 years combined experience, specializing in audit, accounting, and taxes for individuals, companies, Non-Profit Entities, and Homeowner’s Associations.
If you are donating to charities providing earthquake relief in Haiti, you may be able to claim those donations on your 2009 tax return. Here are 10 important facts the Internal Revenue Service wants you to know about this special provision.
1. A new law allows you to claim donations for Haitian relief on your 2009 tax return, which you will be filing this year.
2. The contributions must be made specifically for the relief of victims in areas affected by the Jan. 12 earthquake in Haiti.
3. To be eligible for a deduction on the 2009 tax return, donations must be made after Jan. 11, 2010 and before March 1, 2010.
4. In order to be deductible, contributions must be made to qualified charities and can not be designated for the benefit of specific individuals or families.
5. The new law applies only to cash contributions.
6. Cash contributions made by text message, check, credit card or debit card may be claimed on your federal tax return.
7. You must itemize your deductions in order to claim these donations on your tax return.
8. You have the option of deducting these contributions on either your 2009 or 2010 tax return, but not both.
9. Contributions made to foreign organizations generally are not deductible. You can find out more about organizations helping Haitian earthquake victims from agencies such as the U.S. Agency for International Development ( www.usaid.gov).
10. Federal law requires that you keep a record of any deductible donations you make. For donations by text message, a telephone bill will meet the record-keeping requirement if it shows the name of the organization receiving your donation, the date of the contribution, and the amount given. For cash contributions made by other means, be sure to keep a bank record, such as a cancelled check or a receipt from the charity. Receipts should show the name of the charity, the date and amount of the contribution.
(From IRS Special Edition Tax Tip 2010-01)
Should you have questions regarding this post or any other tax needs, contact us at Schutte & Hilgendorf, PLLC, Prescott accountants serving the greater Yavapai County with tax, accounting, auditing, and QuickBooks consulting expertise.
WASHINGTON — The Internal Revenue Service today reminded tax-exempt organizations to make sure they file their annual information form on time. In 2010 the tax-exempt status of any non-profit that has not filed the required form in the last three years will be revoked.
The Pension Protection Act of 2006 requires that non-profit organizations that do not file a required information form for three consecutive years automatically lose their Federal tax-exempt status. This requirement has been in effect since the beginning of 2007.
A list of revoked organizations will be available to the public, as well as state charity and tax officials on this website.
If an organization loses its exemption, it will have to reapply with the IRS to regain its tax-exempt status. Any income received between the revocation date and renewed exemption may be taxable.
Form 990-series returns and e-Postcards, are due by the 15th day of the 5th month after an organization’s tax year ends.
(From IRS Issue Number IR-2010-010)
Contact us today for assistance filling the appropriate return for your tax-exempt organization.
Should you have questions regarding this post or any other tax needs, contact us at Schutte & Hilgendorf, PLLC, Prescott accountants serving the greater Yavapai County with tax, accounting, auditing, and QuickBooks consulting expertise.
The public accounting firm, Schutte & Hilgendorf, announces the addition of Certified Public Accountant, Adam Rutherford, to the staff. Now at three full time CPA’s, the firm is confident that it has sufficient resources to promptly and professionally serve its many tax and accounting clients during the upcoming 2010 busy tax and auditing season whose numbers have which has grown in the past year.
Adam Rutherford has 5 years of accounting and tax experience with local accounting firms. After graduating from Northern Arizona University in 2005, with a BA in Accountancy, he moved back to Prescott to work at a local accounting firm and received his CPA license in 2008. Hired initially by Schutte & Hilgendorf to help out with the busy tax season of 2009, Adam came on board full time in May 2009 and has been busy ever since working in all areas of tax, auditing, accounting and has become the resident IT go-to guy.
A native of Prescott, Adam is married to wife Mary Ann and now lives in Prescott Valley. He is a member of the Arizona Society of CPAs and the Prescott Young Professionals. Adam enjoys traveling, riding his bike, watching movies, and going to Disneyland as many times as possible each year.
Q&A: Numbers create livelihood for Prescott CPAs
By Ken Hedler
The Daily Courier
Thursday, June 18, 2009
 Les Stukenberg/The Daily Courier Q&A with Gidget Schutte and Lois Hilgendorf, owners of Schutte & Hilgendorf Audit, Accounting & Taxes in the Crossings business park, 3140 Stillwater Drive, Suite A., Prescott. The office is open 8 a.m. to 5 p.m. weekdays “officially,” Schutte said. “During tax season we are here all the time.” The phone number is 778-0079; the website is www.prescottaccountants.com.
Q: Why did they buy the business and when?
Schutte: “We bought out one of the partners, which was Lambson & Rader. Preston Lambson retired, so we bought his business (and started it Jan. 1, 2008). We both worked for the previous company. I had worked with the previous company since 2003.”
Q: What is your previous business-related experience?
Schutte: “I have been a CPA since 1992, and I also worked in finance for private companies before moving to Prescott September 11, 2001.”
Hilgendorf: “Several years in accounting.”
Q: How many employees do you have?
Schutte: “We have three besides ourselves. We have another CPA on staff.”
Q: What changes have you made?”
Hilgendorf: “We are focusing our business where our strengths are, which is auditing. And we offer tax prep and planning for both businesses and individuals, and we also do accounting work, which might include payroll, tax returns and QuickBooks consulting.”
Q: What services do you provide to your clients?
Schutte: “We do focus on homeowners associations, nonprofit organizations and small businesses – local.”
Q: What is the best business advice you have received or given?
Schutte: “All the support we had getting into this business. The advice we took to do it was a great decision for both of us. In general, one of the best pieces of advice I received is ‘Keep it simple.’”
Hilgendorf: “Don’t give up on your dream.”
Q: What has been your biggest business challenge?
Schutte: “It has been challenging, but it has been a new welcome perspective. We are the ones running the company.”
Q: What is the key to your success?
Schutte: “Word of mouth is our biggest PR. The key to our success is being good business partners/advisers to our clients.”
Q: How are you adjusting to the recession?
Schutte: “We are flowing with where our clients are struggling. We’re trying to find ways for them to save their costs. What we mean by that (is) we are scaling back for them to save money but adding value for them in other areas.”
Q: What are your plans for the business?
Schutte: “We want to be the public accounting firm in Prescott, Yavapai County and the surrounding area. We want to get our name out there. By the way, we are having an open house 4 to 7 (p.m.) next Thursday, June 25. We just moved in February from Plaza West (on West Gurley Street). We are really trying to establish this new identity.”
|
We Are The Piece That Fits.
Schutte & Hilgendorf PLLC
3140 Stillwater Drive
Prescott AZ 86305
Phone: 928.778.0079
Fax: 928-778-0261
|
