Say your business is doing well, and you to need to hire some extra workers.
But you may be terrified of all the obligations that go along with adding a person who must be treated as an employee. So you would prefer to add someone who can rightly be treated as an independent contractor. Good idea!
Unfortunately, the government hates the idea of independent contractors, and the IRS has skirmished with businesses for decades about the so-called worker classification issue. Here’s what you need to know about the subject.
Worker classification matters
When a worker is classified as an employee of your business, you generally must withhold federal income tax and the employee’s share of Social Security and Medicare taxes from the worker’s wages. Your business must then pay the employer’s share of Social Security and Medicare taxes, pay federal unemployment tax, file federal payroll tax returns, and follow lots of burdensome IRS and Labor Department rules. You may also get socked with state and local unemployment and worker compensation taxes and have to comply with even more rules and regulations. Dealing with all this stuff can cost thousands of extra dollars a year for each employee.
On the other hand, independent contractor status is beneficial to a business because you don’t have to worry about employment tax issues, and you don’t have to provide expensive fringe benefits like health insurance, retirement plan contributions, and paid vacations.
Keep reading this article at: http://www.marketwatch.com/story/why-the-us-government-hates-the-idea-of-independent-contractors-2017-05-23
