.. Be Thankful I Don't Take it All...

The Voluntary Worker Classification Settlement program reminds me of the Beatles song "The Taxman".  The issues surrounding worker classification are complex, expensive and filled with different taxes everywhere you turn.  Being wrong about them is easy and expensive. Worker Classification is all about whether a person is an employee or an independent contractor.   There are rules to define who is an employee and who is not.  But like everything else involving the tax code the rules are subject to interpretation. 

For purposes of assessing the amnesty program, let’s assume you know that you’ve been misclassifying employees as independent contractors.  There are plenty of reasons to do this.  Having employees is expensive.  First you typically pay half of their payroll taxes.   (This year it’s more than half because the workers are getting a payroll tax holiday.)  In addition, there is the employer portion of state and federal unemployment.  Then there is the cost of administering withholding the employee portion of the taxes and filing payroll tax returns, along with the required informational returns at the end of the year.  If an employee is an independent contractor all you have to do is the informational returns. 

Because the incentive to cheat here is high, the associated penalties are steep.   If you participate in the new program,  the IRS will charge you only ten percent of what you normally would have to pay.  They’ll also waive penalties and interest.  The Tax Mama Blogger does the math and the savings can be written using exponents.  But as we know Uncle Sam is not an overly altruistic guy, so you also have to agree to an extended statute of limitations on the assessments.

There are plenty of experts who say it’s unlikely you’d ever pay up the big numbers.  This is due to the Section 530 “Safe harbor” provision.  This portion of the Revenue Act of 1978 provides a “Get of Jail Free” card to employers who consistently and persistently misclassify workers.  Essentially this legislation says if you had a reasonable basis for thinking the person was not an employee and you treated everyone else in the same position that way, we’ll just leave it be.  There are exceptions to the safe harbor provision and the “reasonable basis” is a subjective standard, so it’s not bullet proof.  I should also mention that other experts  say you should give this program a serious look.  While Section 530 may offer relief for some, it’s not like you can be sure you qualify, and as discussed earlier, the cost of being wrong is high. 

The 2011 Obama budget proposal includes $25 million in funding to enforce worker classification laws and anticipates collecting another $7 billion in taxes as a result.  Small businesses that think they have an issue in this area should seek some help in deciding the best move in their specific case.    

Comments

[intuit quickbooks contact us]

quickbooks error help

[SageSupportNumber]

SageSupportNumber.Com is a US-based company that has grown into an internationally recognized provider of accounting support services with a highly regarded client base.

https://www.sagesupportnumber.com

[quickbooks phone number for expert help]

quickbooks forum canada for expert help
quickbooks free trial canada for expert help
quickbooks help canada for expert help