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What’s the difference between and employee and a contractor?

Posted by on Oct 7, 2014 in Compliance, IRS, Payroll | Comments Off on What’s the difference between and employee and a contractor?

Some employers choose to classify their workers as 1099 contractors instead of as traditional W-2 employees. Generally, this is a bad idea that invites all sorts of scrutiny from the taxing authorities (IRS, state, departments of labor, etc.).  This infographic does a good job of highlighting the differences between employees and contractors and highlights the consequences of misclassification.

 

1099 vs. ee

 

Why Employee vs. Independent Contractor Classification Matters [INFOGRAPHIC] | Wunderland via Work Awesome

A Heads Up to Restaurant Owners

Posted by on Jan 20, 2014 in Compliance, IRS, Payroll | Comments Off on A Heads Up to Restaurant Owners

The IRS has announced their intent to “to more closely examine the taxation of tips and service charges in 2014” (via Accounting Today).  Now, we all know that employees are reluctant to report all their tips, but with the additional scrutiny we are expecting we are advising our clients to be diligent in their efforts to assure compliance with tip reporting requirements.

The IRS has put together a Guide to Tip Income Reporting that you can hand out to your staff that explains the employee’s responsibility and answers frequently asked questions. A few examples:

Do I have to report all my tips to my
boss?tips
If you received $20.00 or more in tips
in any one month, you should report
all your tips to your employer so that
federal income tax, social security and
Medicare taxes, and maybe state in­
come tax can be withheld.

Do I have to report all my tips on
my tax return?
Yes. All tips are taxable income and
should be reported on your tax return.

I was told that I had to report only a
certain percentage of my total sales
as tips. Is this true?
No. You must report to your employer
all (100%) tips you receive, except for
the tips from any month that do not
total at least $0.00.

Sometimes I don’t get tips directly
from customers, but rather from
another employee. Do I need to
report those tips?
Yes. Employees who receive tips from
another employee are required to report
“tip-outs.” Employees often disburse
tips out of their earned tips to another
employee (tip-outs). Remember, all tips
are taxable income.

Do I have to report tip-outs that I
pay to other employees?
No. You report to your employer only
the amount of tips you retain. However,
you must maintain records of tip-outs
with your other tip income (cash tips,
charged tips, split tips, tip pool).

If you have any questions about how to comply or what is required, please don’t hesitate to give us a call. Unify has a unique specialty in restaurant payroll and our software is equipped to handle tip reporting, FICA tip credit, tip make-up, tipped overtime, and other restaurant payroll situations.

 

Colorado’s Minimum Wage for 2014 is Now $8.00 Per Hour

Posted by on Dec 11, 2013 in Colorado, Compliance | Comments Off on Colorado’s Minimum Wage for 2014 is Now $8.00 Per Hour

Effective January 1, 2014, Colorado’s minimum wage is $8.00 per hour for regular employees and $4.98 per hour for tipped employees.

Our source:

colorado min wage

Can I mandate direct deposit for my employees?

Posted by on May 1, 2012 in Compliance | Comments Off on Can I mandate direct deposit for my employees?

Direct Deposit Mandate Rules - Unify Payroll, A Colorado Payroll Service

Contractor or Employee – That is the Question.

Posted by on Jan 26, 2012 in Compliance, Payroll | Comments Off on Contractor or Employee – That is the Question.

As a small business owner, there are many challenges to understanding all of the tax codes regarding payroll taxes and how to treat different workers in your company. Finding the right answer to the contractor versus employee question can mean a big difference in how you treat that individual for tax purposes.

Let’s look at the semantics of each type of worker to better understand how it can impact your small business.

Independent Contractor
Doctors, lawyers, dentists, veterinarians, contractors, writers, graphic designers, and accountants are among just a few of the many professionals who often work as independent contractors. That doesn’t mean that in every instance these individuals can always be considered “independent”. Much depends on how, where, and under what supervision they perform their tasks.

For instance, a physician can work in the employment of a hospital or physician practice and be an employee that receives benefits and pays federal taxes out of each paycheck, while another physician colleague may work per Diem on a contract basis. The general rule from the IRS to determine if the individual is an independent contractor involves whether or not the payor has the right to control or direct only the result of the work and not what will be done and how or when it will be completed. Those receiving pay as an independent contractor are subject to Self-Employment Tax. Remember that for 2010, if you are considered self-employed you can also reduce your net self-employment tax by deducting your health insurance costs on Form 1040.

Employee
If you control specific details of your worker’s job such as what will be done and how it will be completed, then you are going to be considered an employer/employee relationship by the IRS. That means that as the business owner, you will be responsible for withholding and paying Federal Income Tax, Social Security and Medicare taxes on behalf of that worker. The IRS takes payroll taxes very seriously. Not only are you paying taxes as the business owner, you are also a third party payor collecting and submitting taxes on behalf of your employees.

Additionally, employers are responsible for paying Federal Unemployment (FUTA) and State Unemployment (SUTA) taxes. FUTA and SUTA taxes are not paid by employees or withheld from their pay. Failure to pay these taxes will result in heavy penalties and fines which can quickly snowball into substantial amounts if you aren’t meticulous in your reporting.

Effective January 1, 2011, taxpayers must deposit all depository taxes such as employment, tax, excise tax and corporate income tax, electronically using the Electronic Federal Tax Payment System (EFTPS). Each state has separate recording and payment systems so it’s important to check with your local and state revenue offices for details. And that’s just the beginning. Managing payroll tasks can be time consuming and confusing for many small business owners. Depending on the size of your staff and to alleviate worry and the risk of over or underpayment, it may be wise to invest in a payroll service to help manage your payroll and all of the changes that seem to come with the job.

To make a determination about how your business should treat an individual who performs work for your company, consider the following test from the IRS:

1) Does your business control or have the right to control what the worker does and how the worker does his or her job? If you control when, where or how the individual performs the work, then the worker is an employee.

2) Are the business aspects of the worker’s job controlled by the payer? For example, do you provide the tools, computer system or other means necessary for the individual to complete their work? If the employee works in your office, uses your computer systems or other tools to complete the tasks, then the IRS would consider that individual an employee.

3) Do you have written contracts or employee benefits for this individual? Does the employee receive vacation pay, retirement benefits, health insurance or other ‘benefits’ of working at your organization? If you answered ‘yes’ then the IRS would consider that individual an employee.

Once you answer these questions, review the results and see to what degree the responses fall in either the independent contractor or employee category. Not only are employers responsible for federal taxes and rules, but each state has its own rules pertaining to independent contractors and employees as well as payroll tax requirements. When in doubt, it is always best to consult a small business accountant or bookkeeper or a tax professional.

Tips on Outsourcing Your Small Business Payroll

Posted by on Jan 26, 2012 in Compliance, IRS, Payroll, Tax | Comments Off on Tips on Outsourcing Your Small Business Payroll

For those small business owners who find that they just don’t have enough hours in the day to get everything done, outsourcing certain company operations, such as payroll, can be cost-effective. It can also relieve stress and reduce the possibilities of errors. Among some of the greatest benefits of outsourcing your payroll is that it gives you, as the business owner peace of mind knowing that payroll is being completed by professionals. A few of the other benefits are:

  • Reduces payroll mistakes
  • Payroll is completed on time each week
  • Greatly reduces possibility of IRS penalties
  • Eliminates risk of missing payroll deposit deadlines

Most small business owners try to handle everything right in the beginning in order to save money. Though this is sometimes necessary, having an accounting service on board right from the beginning means that all your record keeping tasks will be set up correctly from day one. Incurring just one IRS penalty in the course of a year can pay for the services of a qualified bookkeeping firm. If however, you can only afford to outsource one thing, then payroll is usually the best bet.

How to Tell When You Need to Outsource Payroll

Most of us live by the old saying, “If it ain’t broke, don’t fix it.” If your payroll is getting done correctly and on time each week and your quarterly IRS payments are being made on time, then you may not need to outsource your payroll yet. If you sometimes experience problems getting your payroll deposits in on time, then this is not only bad for the moral of employees, but it can also cost you up to 10% in penalties.

Employees are much happier and more productive when they know they will get paid on time and that their paycheck amount will be correct. When mistakes start happening, this can cause an unsettling ripple effect through your company. Employees can lose confidence in your business and start to worry that it might be in financial trouble. As a small business owner, you never want to inadvertently send negative signals like this.

IRS Announces 2012 Standard Mileage Rates

Posted by on Jan 25, 2012 in Compliance, IRS | Comments Off on IRS Announces 2012 Standard Mileage Rates

IRS Announces 2012 Standard Mileage Rates

The Internal Revenue Service today issued the 2012 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

Beginning on Jan. 1, 2012, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

  • 55.5 cents per mile for business miles driven
  • 23 cents per mile driven for medical or moving purposes
  • 14 cents per mile driven in service of charitable organizations

The rate for business miles driven is unchanged from the mid-year adjustment that became effective on July 1, 2011. The medical and moving rate has been reduced by 0.5 cents per mile.

The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs as determined by the same study. Independent contractor Runzheimer International conducted the study.

Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for more than four vehicles used simultaneously.

These and other requirements for a taxpayer to use a standard mileage rate to calculate the amount of a deductible business, moving, medical or charitable expense are in Rev. Proc. 2010-51.

Notice 2012-01 contains the standard mileage rates, the amount a taxpayer must use in calculating reductions to basis for depreciation taken under the business standard mileage rate, and the maximum standard automobile cost that a taxpayer may use in computing the allowance under a fixed and variable rate plan.

Why you should not put I-9’s in employee personnel files

Posted by on Jan 25, 2012 in Compliance | Comments Off on Why you should not put I-9’s in employee personnel files

You should not put I-9 forms within an employee’s personnel file. You will get Form I-9s from the United States Citizen and Immigration Services (USCIS). These forms are used for all employees to verify that you have checked their eligibility to be employed within the United States.

Instead of keeping the I-9 Forms in separate personnel files, you should keep all of these forms within a separate folder for the USCIS. The government maintains the right to inspect these forms. If the government does come to inspect the Form I-9s, you do not want the government seeing the other documents contained within your personnel files. This would not only jeopardize the privacy of your employees, but it could also open your company up to further investigation on other grounds.

via: findlaw.com

To download the latest version of the I9 and/or other employee forms, click here.

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