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Archive for September, 2021

Are you an employee or an independent contractor?

Wednesday, September 22nd, 2021

We often get asked this question, whether a person is an employee and should be issued a W-2 or is the person an independent contractor and should be issued a Form 1099-NEC. The main difference is that if the person is an employee then payroll taxes have to be paid by the employer and on behalf of the employee. If the person is an independent contractor you pay them what they earn and then simply issue that person a Form 1099-NEC at the end of the year to show the yearly compensation. For this reason many employers would rather have the person classified as an independent contractor but the IRS says not so fast! The IRS has guidelines on whether or not a person should be classified as an employee or an independent contractor. Per the IRS, the main questions to ask are:

• Behavioral Control − does the company control or have the right to control what the worker does and how the worker does the job?
• Financial Control − does the business direct or control the financial and business aspects of the worker’s job. Are the business aspects of the worker’s job controlled by the payer? (Things like how the worker is paid, are expenses reimbursed, who provides tools/supplies, etc.)
• Relationship of the Parties − are there written contracts or employee type benefits (i.e. pension plan, insurance, vacation pay, etc.)? Will the relationship continue and is the work performed a key aspect of the business?

If the employer has the above control over a worker then typically the worker will be an employee.

There are penalties for those employers that incorrectly classify a worker as an independent contractor instead of an employee so you want to go through the above questions to make sure you do it correctly.

The information provided in this blog does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available in this article are for general informational purposes only. Information on this website may not constitute the most up-to-date legal or other information. Please consult your tax advisor on all the above issues.

Understanding how the IRS communicates with you

Wednesday, September 8th, 2021

Arming yourself with the knowledge of how the IRS communicates with taxpayers may help prevent you from becoming a victim to a scam. The IRS has issued some facts about how they typically communicate with taxpayer:

• The IRS does not typically communicate initially with a taxpayer via email. Do not reply to this unsolicited type of email.
• The IRS will not text you or contact you via social media. These two avenues are favorites of scammers.
• The first contact from the IRS is usually via a letter delivered by the U.S. Postal Service. Scammers will often tell you that a letter from the IRS was already sent to you because they know most people know that the IRS will first contact you with a letter. If you receive a letter and want to verify if its legit you can search on the IRS website:

https://www.irs.gov/individuals/understanding-your-irs-notice-or-letter

Not all notices/letters are searchable on the above site. If you would still like to verify a notice is legit you can call the IRS directly at 800-829-1040.

• IRS Revenue Agents or tax compliance officers may call a taxpayer after they send a notice. Below is a guide to assist taxpayers to know whether the call is legit or not:

https://www.irs.gov/newsroom/how-to-know-its-really-the-irs-calling-or-knocking-on-your-door-collection

• IRS Revenue Agents and tax compliance officers will routinely make unannounced visits. Please remember that they only form of pay legit IRS employees will ask for are payments made to the US Treasury. If you get visited make sure to ask for credentials, the IRS will have two forms of identification, a pocket commission and a Personal Identity Verification Credential:

https://www.fedidcard.gov/

The information provided in this blog does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available in this article are for general informational purposes only. Information on this website may not constitute the most up-to-date legal or other information. Please consult your tax advisor on all the above issues.