IRS INFORMATION
Issue
Number: Summertime Tax Tip 2009-20
Employee vs. Independent
Contractor – Ten Tips for Business Owners
If you are a small business owner, whether you hire people as independent
contractors or as employees will impact how much taxes you pay and the
amount of taxes you withhold from their paychecks. Additionally, it will
affect how much additional cost your business must bear, what documents and
information they must provide to you, and what tax documents you must give
to them.
Here are the top ten things every business owner should know about hiring
people as independent contractors versus hiring them as employees.
1.
Three characteristics are used by the IRS to determine the
relationship between businesses and workers: Behavioral Control, Financial
Control, and the Type of Relationship.
2.
Behavioral Control covers facts that show whether the business has a
right to direct or control how the work is done through instructions,
training or other means.
3.
Financial Control covers facts that show whether the business has a
right to direct or control the financial and business aspects of the
worker's job.
4.
The Type of Relationship factor relates to how the workers and the
business owner perceive their relationship.
5.
If you have the right to control or direct not only what is to be
done, but also how it is to be done, then your workers are most likely
employees.
6.
If you can direct or control only the result of the work done -- and
not the means and methods of accomplishing the result -- then your workers
are probably independent contractors.
7.
Employers who misclassify workers as independent contractors can end
up with substantial tax bills. Additionally, they can face penalties for
failing to pay employment taxes and for failing to file required tax forms.
8.
Workers can avoid higher tax bills and lost benefits if they know
their proper status.
9.
Both employers and workers can ask the IRS to make a determination on
whether a specific individual is an independent contractor or an employee by
filing a Form SS-8 – Determination of Worker Status for Purposes of Federal
Employment Taxes and Income Tax Withholding – with the IRS.
10.
You can learn more about the critical determination of a worker’s
status as an Independent Contractor or Employee at IRS.gov by selecting the
Small Business link. Additional resources include IRS Publication 15-A,
Employer's Supplemental Tax Guide, Publication 1779, Independent Contractor
or Employee, and Publication 1976, Do You Qualify for Relief under Section
530? These publications and Form SS-8 are available on the IRS Web site or
by calling the IRS at 800-829-3676 (800-TAX-FORM).
Links:
Issue
Number: IR-2009-045
Tax Breaks Available for
Taxpayers Who Purchase Qualified Plug-In Electric Vehicles
WASHINGTON — Plug-in electric vehicles using certain types of batteries may
qualify for a new tax credit if purchased this year, the Internal Revenue
Service said today.
The Emergency Economic Stabilization Act of 2008 (EESA) and the American
Recovery and Reinvestment Act of 2009 (ARRA) created two new tax credits for
various types of electric vehicles, which may include what are commonly
referred to as neighborhood electric vehicles.
ARRA creates a tax credit for low-speed or two- or three-wheel electric
vehicles, such as motor scooters, purchased after Feb. 17, 2009, and before
Jan. 1, 2012. The amount of the credit is 10 percent of the cost of the
vehicle, up to a maximum credit of $2,500. To qualify, a vehicle must be
either a low-speed vehicle that is propelled to a significant extent by a
rechargeable battery with a capacity of at least 4 kilowatt hours or be a
two- or three-wheeled vehicle that is propelled to a significant extent by a
rechargeable battery with a capacity of at least 2.5 kilowatt hours.
EESA created a tax credit for vehicles that have at least four wheels and
draw propulsion using a rechargeable traction battery with at least four
kilowatt hours of capacity. For 2009, the minimum credit is $2,500 and the
credit tops out at $7,500 to $15,000, depending on the weight of the vehicle
and the capacity of the battery.
During 2009, low-speed, four-wheeled vehicles manufactured primarily for use
on public streets, roads and highways (neighborhood electric vehicles) may
qualify both for the EESA credit and, if purchased after February 17, 2009,
for the ARRA credit for low-speed electric vehicles. A taxpayer may not
claim both credits for the same vehicle. Vehicles manufactured primarily for
off-road use, such as for use on a golf course, do not qualify for either
credit.
The Internal Revenue Service is working on guidance regarding certification
procedures for both of these credits.
IR-2005-145
December 20, 2005
IRS
Warns of Questionable Deductions for Donated Vehicles
The
rules for determining the amount that a donor may deduct for a charitable
contribution of a qualified vehicle, including an automobile, with a claimed
value of more than $500 changed at the beginning of 2005 as a result of the
American Jobs Creation Act of 2004. In general, that Act limits a
donor’s deduction to the amount of the gross proceeds from the charity’s
sale of the vehicle.
Under
an exception to this general rule, a donor may be eligible to claim a fair
market value deduction if the vehicle is sold at a price significantly below
fair market value to a needy individual, in direct furtherance of a charitable
purpose of the recipient organization of relieving the poor and distressed or
the underprivileged who are in need of a means of transportation.
In this case, the charity provides to the donor an acknowledgment
indicating that the donor may claim a fair market value deduction for the
vehicle.
Because
this exception does not apply to sales at auction, a
charity may be subject to penalties
under sections 6701 and 6720 of the Internal Revenue Code if the charity
sells a donated vehicle at auction and provides to the donor an acknowledgment
that indicates anything other than the deduction may not exceed the gross
proceeds from the sale.
|
