Worker misclassification affects more than FICA

Article Abstract:

There are several issues that should be considered by businesses in reclassifying workers as independent contractors. Reclassification does not only affect the employee's share in Federal Insurance Contributions Act tax payments but would also influence the tax deductibility or workers. Unreimbursed business expenses are deductible and are identified as such on Schedule A, Employee Business Expenses and Form 2106. Fringe benefit entitlements such as health and life insurance and miscellaneous excluded benefits are deductible as provided for in sections 106(a) and 132 of the Tax Code, respectively. Qualified retirement plans that satisfy Section 401(a) are considered fringe benefits and are therefore deemed deductible.

Compensation and benefits, Employee benefits, Workers

---

Incorrect determination of worker status can lead to penalties, but relief is available

Article Abstract:

Proper classification of workers as either employees or independent contractors is discussed in terms of taxation on the pay to both types of workers, especially in agricultural and construction industries. When workers have been incorrectly classified, the employer is liable for the payment of taxes to the federal government in amounts equal to those that should have been withheld from the worker salaries, plus penalties. Classification criteria and the possible effects of reclassification by the Internal Revenue Service are discussed in detail, and examples are presented to illustrate theories behind the tax regulations.

Employer liability, Accounting and auditing, Contracts, Compensation management, Wages, Wages and salaries, Labor contracts

---

Cost increases for misclassifying a worker as an independent contractor

Article Abstract:

Provisions of the Tax Reform Act of 1986 have increased the importance of properly classifying workers as employees or contractors. The right to direct or control the worker remains the key factor in any analysis, and if the company has any control, the individual will probably be considered an employee. Safe-haven tests and restricted liability for misclassification somewhat reduce the employer's risks in treating an employee as a contractor, but penalties for misclassification remain severe and far-reaching. The employer should request a ruling so as to minimize the chances of misclassifying employees.

Tax penalties

Similar abstracts:

• Abstracts: Towards the European accountant. Regulating auditors: independence and incorporation
• Abstracts: A personal prediction for the U.K. economy. When forecasting is unusually hazardous. Interest rates set to fall further
• Abstracts: Discretionary management earnings forecast disclosures: antecedents and outcomes associated with forecast venue and forecast specificity choices
• Abstracts: Estate planning ideas for qualified small business stock. Supreme Court closes the door (almost) on ordinary losses for stock transactions

This website is not affiliated with document authors or copyright owners. This page is provided for informational purposes only. Unintentional errors are possible.