Archive for the ‘Business’ Category
Just over a year ago, we posted a blog entry about the Internal Revenue Service cracking down on employers who improperly classify workers as independent contractors rather than employees, and warned that it may be a costly mistake.
Recently, as part of a larger “Fresh Start” initiative, the IRS launched a new program which may provide some relief to certain employers looking to resolve past worker classification issues. That program—the Voluntary Classification Settlement Program (“VCSP”)—allows eligible employers to reclassify the workers as employees and only pay an amount of approximately 1% of the wages paid to the reclassified workers for the past year, with no other interest or penalties. For further details, including eligibility requirements, please visit the IRS website: http://www.irs.gov/newsroom/article/0,,id=246203,00.html
If you are concerned that your independent contractors may be misclassified, and are worried about the potential consequences for you in the event of an audit, we highly recommend consulting a knowledgeable attorney or tax professional to see if the VCSP may be a solution.
In the age of identity theft and tight credit markets, we all know that keeping an eye on your credit is important. Detecting fraudulent activity and errors early allows you to take steps to avoid identity theft and correct mistakes that may cost you money.
Under federal law, each of the three major credit reporting agencies (Equifax, Experian, and TransUnion) are required to provide you with one free copy of your credit report every 12 months. You can easily order your credit reports from these agencies through annualcreditreport.com (online, by phone, or through the mail). BEWARE—there are many imposter websites out there. Annualcreditreport.com is the official site created by the three major credit reporting agencies.
When you order your report(s), you have the option to order one, two, or all three of the available credit reports. While each report may contain different information, each report will generally give you a “snapshot” of your credit at that point in time. Rather than requesting all three at the same time, it may be advisable to stagger your requests throughout the year, requesting a credit report from each of the three agencies at different times. That way, you will be able to see your credit snapshot several times throughout the year, rather than just once, so you can discover potential issues with your credit earlier.
For more information about obtaining your free credit reports, see:
https://www.annualcreditreport.com/cra/index.jsp
http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre34.shtm
With the recent recession and the tight credit market, have you completely given up on even considering trying to get a loan for your small business? After reading this article in the Wall Street Journal, you may want to reconsider applying:
Big Banks Loosen Lending Standards
http://online.wsj.com/article/SB10001424052748704868604575433441447633952.html
The Article reports that while banks may be easing lending standards and terms, the demand for loans among consumers and businesses remains low. Along with current low interest rates, this recent change in lending standards and higher competition among banks for business, may make it worth your while to take a second look at applying for a loan for your business.
In these economic times, many business owners may be tempted by the appeal of hiring independent contractors rather than employees, in order to avoid many of the costs and withholding requirements associated with employees. While classifying a worker as an independent contractor may provide financial savings and less paperwork for a business owner, it may also be a costly mistake if the classification was done improperly. The IRS does not favor independent contractors and, as discussed in the attached article, recently launched a new program that “will randomly examine 6,000 companies over the next three years for employee misclassifications. The federal government estimates it will raise $7 billion over the next 10 through tighter enforcement.”
http://money.cnn.com/2010/03/29/pf/taxes/employee_audit_crackdown.smb/index.htm
Many business owners mistakenly believe that they are protected by simply signing a contract with the worker stating that the worker is an independent contractor. However, the mere existence of an independent contractor’s agreement—no matter how well drafted—does not mean that the worker is not an employee in the eyes of the IRS. The contract is only one of the factors the IRS will look at in order to determine if the worker is an employee or independent contractor. The IRS considers the entire relationship and looks at three broad categories of factors including behavioral control, financial control, and the type of relationship of the parties. For more information on these factors, please see the IRS website:
http://www.irs.gov/businesses/small/article/0,,id=99921,00.html
Understanding these factors can help a business owner in considering whether to hire an employee or an independent contractor. Also, companies with existing independent contractors should consider an internal assessment of their current independent contractors to ensure that those relationships are correctly classified.
The distinction between employees and independent contractors is important. If there is any doubt in applying the IRS factors to a particular situation, a business owner should consult a knowledgeable attorney or tax professional.
